Startup or small business: what is the difference

Start-ups and small businesses have a lot in common, but there are significant differences which are important for every founder to know in order to avoid mistakes at the start.

A startup is a company which introduces some new technology or product. It grows and develops very quickly from the start.

A small business is an established business model which rarely has novelty.

5 differences between a startup and a small business

Innovation

One of the key attributes of a startup is innovation. Startups create something new: a technology or a business model.

A small business doesn't claim to be unique; it's one of millions: a restaurant, beauty salon or bakery.

Revenue

The most noticeable difference between a startup and a small business is profitability and long-term value.

A small business is more likely to make a profit in the first few days.

For a start-up, the main objective is to create a new product that customers will want to buy. It may take a few months to a few years before a startup starts making any money at all.

Scale up

Generally, a small business grows for as long as the founder thinks it should. The startup aims to capture as much of the market as possible.

Technology

A small business doesn't need any special technologies; there are plenty of ready-made methods and applications for promotion, accounting and other tasks.

The technology is most often the product of the startup.

Funding

To start a business, a small business entrepreneur needs personal savings and contributions from family or friends. Entrepreneurs can bring in an investor, or share startup funds with a business partner.

The most common type of financing for start-ups is investment by venture capitalists and business angels. Crowdfunding is becoming an increasingly popular way to raise investment in a startup.

Whether you are creating a startup or starting a small business, it is important to understand the difference between the two types of companies