When it comes to business, the terms "startup" and "small business" are often used interchangeably. However, there is a big difference between the two. To help you better understand where a startup and a small business differ, let’s break down the key differences.
What are the key differences between a startup and a small business?
Growth Potential
One of the biggest differences between startups and small businesses is their growth potential. Startups are typically characterized by high growth potential because they are in the early stages of development. This means that they have room to grow and expand their operations. Small businesses, on the other hand, have more modest growth potential because they are more established.
Funding
Another key difference between startups and small businesses is their funding. Startups are often venture-backed, which means they have access to capital from investors. Small businesses, on the other hand, typically rely on loans, personal funds, or consistent revenue to finance their operations.
Risk Factor
The risk factor is also higher for startups than it is for small businesses. This is because startups are unproven entities with no track record of success. Small businesses, on the other hand, have a proven track record and are less risky as a result.
Management style
The management style of a startup is typically much different than that of a small business. Startups are often run by "serial entrepreneurs" who have a lot of experience starting and growing companies. They're used to taking risks and moving quickly, which can be a big advantage in today's fast-paced business world. Small businesses, meanwhile, are usually run by first-time entrepreneurs who are more risk-averse and focused on sustaining their business rather than growing it.
Exit strategy
One of the key differences between startups and small businesses is their exit strategy—or lack thereof. Startups typically don't have an exit strategy because their goal is to grow their company until it goes public or gets acquired by another company. Small businesses, on the other hand, typically do have an exit strategy because their ultimate goal is simply to sustain themselves financially.
Signs your business is out of the startup phase
1. You're no longer the only one wearing multiple hats.
In the early days of a start-up, it's not uncommon for the founder (or founders) to wear multiple hats. You might be responsible for sales, marketing, product development, customer service, and more. But as your business grows, you'll likely need to delegate some of those tasks to employees or contractors. This can be a difficult transition for many entrepreneurs, but it's an important one. Letting go of control can be scary, but it's necessary if you want your business to continue growing.
2. You have a clear brand identity.
In the early days of a start-up, your main focus is probably on getting your product or service off the ground. As such, there's often less emphasis on things like branding and marketing. But as your business grows, you'll need to develop a clear brand identity that sets you apart from your competitors. This includes everything from your logo and website design to the way you communicate with customers and prospects. Establishing a strong brand will be critical to continuing your company's growth.
3. You're generating consistent revenue.
One of the biggest challenges for start-ups is generating consistent revenue. In the early days, it's not unusual for businesses to experience feast or famine cycles when it comes to sales and revenue. But as your business matures, you should start to see more consistent revenue streams coming in month after month (and year after year). If you're still experiencing big ups and downs in revenue, it's a good indication that your business is still in startup mode.
There's no magic formula for determining when a business is out of its start-up phase. However, there are some general indicators that can give you a good idea of whether or not a business has officially "launched." If the company is generating revenue, has a plan for long-term sustainability, and has a clear understanding of their place in the market, chances are good that the start-up has successfully launched!