How To Decide if Entrepreneurship or a Startup is Closer to You

Thanks to the thriving tech startup centers such as Silicon Valley, Singapore, or New York, and the growing numbers of small businesses in the past decades, you could question yourself if becoming an entrepreneur or a startup founder is closer to you. No wonder why it is not too clear these days. We have been mixing up the two fields, calling any new businesses a startup. Here are a few points to consider if you are unsure of your choice.

The Main Difference Between Startups and Small Businesses

Entrepreneurs want to do what they are great at remaining independent through their business circles instead of becoming a key market player by changing it with something new in a fast way. If you look at the examples of Airbnb, Instagram, Mailchimp, or Uber, you will see why. Coming up with a revolutionary business model, expanding it promptly with the backing of investors is not for the faint of heart. 

While a startup is usually innovative and scalable, aiming to bring something new into their field, small businesses don’t quite have the same growth plans. Many new startups don’t go beyond their first year, being very ambitious ventures, and looking for quick expansion in a given field. It is, at least to say, a very risky adventure. A startup by its nature is created to grow at a high speed, whereas a small business isn’t necessarily. 

If you don’t want to disrupt the market, or don’t have aggressive growth plans to win over your competitors, your small business can still prosper. All you need to do is to find your niche and people you can reach effectively in the long run. This also contributes to another big difference, while startups are mainly tech companies, small businesses are usually small niche ventures that could be found in main streets, like dentists, hairdressers, carpenters, repairmen, various shops, and so on.

Long-term Versus Short-term Objectives

If you want to serve your niche market through your unique services, and you are content staying on that level of business, you don’t need to think about creating a startup. Small businesses usually stay on the market for long years before passing it on to family members or stopping their operations. You have to make the most of your business while it is in operation. 

A startup is created with a non-permanent approach, with a view of changing direction, if needed. 

Although, when a startup finds a major direction and sticks to it, it becomes more of a company. Therefore, it is not always transparent, when a startup isn’t a startup anymore unless another company purchases it or it goes through an initial public offering (IPO) and becomes public. So, you should also have a clear end picture in mind of where you want your business to end up. 

Another difference is the funding of startups and small businesses. 

Different Avenues of Funding Opportunities

The interest to invest in startups as opposed to small businesses is understandably higher. Since startups are created to be more profitable faster, they attract more investors. If you are thinking of a startup you should aim to build up your networks of (private) equity funders, such as angel investors and venture capitalists. They can invest in your venture in return for ownership. Usually, they offer a basic amount of funding in exchange for some equity. 

Since startups couldn’t manage alone without raising funds, they tend to lose their independence after a while due to diversified ownership. Having more investors in your startup doesn’t only allow your startups to better cope financially, but could also provide you more chances for mentorship and advice from your investors. On the other hand, small businesses operate differently. They like their independence and don’t have an interest in what most venture capitalists stand for: investing in startups with potential for large growth.

Count with the Risks 

Risks are always a part of life, be it working for someone or doing your own business. The risks of launching a startup or a small business are incomparable because of the high-level risks of startups. Launching a startup requires you to not only put in a lot of effort, and have faith, but keep on going during difficulties. You will need to educate yourself thoroughly, find investors and experiment with your products or services tenaciously.

Photo by Daria Nepriakhina on Unsplash

Provided, you wouldn’t succeed, you also need to be prepared for a big loss. Therefore, it is best, if you have sufficient resources, time, energy, and a Plan B, in case it turns out, you need to do something else instead of your startup. Even though about a fifth of small businesses also collapse within the first year of their launch, they have a much higher chance of success. They can be operated with much fewer risks since you can establish them in already existing, tried, and tested paths. 

Endnote

In my experience, startups work best for people who enjoy thinking outside of the box and are willing to contribute to the world with something new. Such people can be adventurous and are not afraid of a big business challenge. They usually have great work experience, and even greater networks to make their dreams happen. They are high achievers and big dreamers. 

These entrepreneurial spirits tend to tenaciously work their way up the career ladder.

With such distinctive differences, it is easy to have an idea whether establishing a small business or a startup could be closer to you. When doing so, make sure you are ready to set the right goals for yourself, build quality networks with possible investors, and work out a detailed plan for each scenario along the way. This is a great time to make it happen! Wishing you great luck in your future venture!!