Small Business vs Startup
What would you do if you have an open yard in front of your house and you want to have some shed on it to get rid of direct sunlight? Would you set up a big umbrella or, being futuristic, would you plant a tree?
I’ve been in this industry for more than 21 years and in a job for 16 years. Although I knew what a Startup is and how it works, I can’t swear that I knew a lot about the startup. Even after opening a software company back in 2016, Startup was not fully clear to me. But when I introduced Xtra, the first-ever digital gifting service in Bangladesh, I came along to understand how Startup really works.
Very few people in the industry who are not actively involved with Startup may have no clear idea about how Startup works. Actually, some stuff can only be understood by doing it, not reading or talking about it. Startup might be one of them.
So, what is Startup? How does it differ from Small Business? I will try to explain them at the bar of four major factors from my own experiences.
1. The Path
To start a small business, a person, more or less, knows about his/her business, it’s goal, growth, potential and so on. For instance, you want to open a business of mineral water bottle or even launching a software company, you probably already have researched the market about the path, right? As it is mostly common business, a person knows the path of production, sales, operations etc and there is not any big surprise on their way.
But things are not the same for a startup. A startup is like having an innovative idea, which nobody may have done the way you are trying to do. When it’s an innovative idea and you got no predecessor, the path is not yet clear to you. Facebook, NetFlix, bKash, and Sheba can be very good examples of a startup, think about the time when they started their journey.
2. Final Product
For an individualist, opening a small or typical business, one already knows what their products/services would be. If it’s a soap company then certainly the final product is soap. If it’s a service company like a pest control company, then pest control would be his service. Pretty much clear on product or service before starting.
Meanwhile, the startup’s idea is a whole lot different than the typical business. In a startup, an entrepreneur can start with a product/service initially, but no one can’t guarantee that it would be their final product/service. Local startup ‘Shohoz’ started as a bus ticket, now they have ride-sharing, food and truck delivery services and still may not have finalized their final product line up. Netflix started as a video rental company, now they are the leading video streaming platform for movies and TV series. These companies are the reflections of how final products get selected in a startup. In brief, products are not fixed in a startup. It requires continuous innovation and research to find the winning product which is scalable, solves big problems, and has greater impact in the society. Finally, it should have a sustainable business model.
3. Focus/Target
It’s quite obvious that a business wants to increase its revenue. But how do small business plans to do so? Their primary focus is on how they can scale up the revenue while keeping the risk as low as possible.
On the other hand, the primary focus of a startup is problem solving, scalability, innovating and so on. Here sky is the limit for risks upon the business but when a startup can solve a critical problem, revenues generate like a spark. We know how Jack Ma hasn’t made any revenue in the first 3 years. And then? The rest is history.
4. Business Growth and Funding
To calculate the cost or investment for starting a small or typical business is easy. The initial investment is fixed and that fund can be raised by taking a loan from a bank or borrowing from relatives. Generally, the growth of this kind of small business is around 10%-30%.
While financing is not easy with a startup, not even a timeline. It takes a lot of investment and time to do innovative research, market research, product research, market growth and other business factors. Investment is not fixed in a startup so making a long-run plan is quite impossible. So, what a startup does is creating a time plan and raising funds from angel investors or venture capital. Yes, the risk of being a failure is high, but who succeeds in a startup, their scale of revenue becomes skyrocket. We all know the examples of Amazon, Facebook or even Alibaba.
In brief, to select and move forward between Startup and Small Business, you need to research to realize which one fits you the best. Because both of them have their own pros and cons. At the end of the day, it’s your ability, passion and making the right decision of choosing whether a startup or a small business will achieve your desired goals.
The same content with my video and Bangla:
