People tend to use entrepreneurship and small business interchangeably to describe a business with limited resources seeking to achieve a certain objective. While this may be true, the similarities end there. In reality, entrepreneurs and small business owners tend to have opposite views on their objectives and approach. So what are the differences between entrepreneurship and small business?
In this post, we’ll cover the various characteristics of both a small business and an entrepreneurial venture to describe the main differences.
What are the differences between an entrepreneurial venture and a small business?
A small business is an organization, partnership or sole proprietorship that has fewer resources and annual revenue than a medium or large company.
An entrepreneurial venture is the concept of starting a small business to offer a product or service with the intention of disrupting an industry or maximizing profit.
Objective: Innovation, High Growth, and Profit. Entrepreneurial ventures aren’t just concerned with making money, they want to make more. They’re the ones that dare to shake up a market by introducing an innovative product or feature or become the most recognized brand from the quality of service or production. Entrepreneurial ventures are typically founded with a great idea or concept behind them.
Leadership Traits: Highly Motivated and Influential. Entrepreneurs are visionaries. They can see the forest for the trees, the overall plan towards success that no one else can see. Entrepreneurs know how to keep people motivated while also holding them accountable.
Team Traits: Experienced and Specialized. Team members of an entrepreneurial venture are constantly improving their processes and finding ways to do their work more efficiently and develop more unique products and offerings. They may also have a sense of friendly competition between teams as they constantly look to improve themselves.
Management Strategy: High Risk and Long-Term Planning. There’s a misconception that entrepreneurs are always taking risks without any plan. Conversely, some believe they are veterans in business development. In reality, they are simply attempting to develop an idea, service, or product under extreme uncertainty, and planning as much as possible to minimize waste and loss. This can apply to the college student with a startup, or the CEO leading his fourth company.
Environment: Fast-paced and Competitive. Businesses looking to grow don’t have time to waste, and often rely on smart time management and prioritization. Their offices are designed to encourage collaboration and discussion, while also promoting productivity.
Objective: Maintaining regular business. Small businesses aren’t always concerned with growing or becoming more profitable, they just care about the work they do day-to-day. Their goal is to ensure longevity and continual development.
Leadership Traits: Patience and Discipline. Small business owners are more driven by small gains over time and improving efficiency than competing with other businesses. They want to ensure the business continues to operate smoothly and steadily.
Team Traits: Calm and Objective. While small businesses can still be competitive, they are made up of individuals who care less about wins or profit and care more about their recurring duties and obligations.
Management Strategy: Flexible and Low Risk. The overall strategy is to ensure that there is a continuous stream of work and money for the team. While there may be uncertainty early in the business, after reaching certain milestones, small businesses become comfortable in their processes and routines.
Environment: Relaxed and Comfortable. A small business has a calm and quiet environment so everyone can do their work without any stress or concerns. Because of the limited resources, small businesses may operate out of smaller offices than other firms, or may even work remotely from their homes.
While entrepreneurs and small businesses have a lot in common, they are fundamentally different in terms of goals, strategies, and culture. Remember that entrepreneurs are looking for growth in profit and scale, while small business owners focus on building steady work and income. Neither one is particularly better than the other, but the two management styles can make a difference depending on the line of work.
The Pros & Cons of Entrepreneurship and Small Business
While entrepreneurial ventures and small businesses have their differences, they also share many of the same pros and cons:
Flexibility – Small businesses and entrepreneurial ventures are able to make decisions at a much faster rate compared to a major corporation. Since their teams are smaller and hierarchies are less frequent, they don’t have much bureaucracy to deal with. This makes for greater innovation and efficiency.
Greater Profit – With fewer people on the team and lower overhead than a corporation, small businesses and entrepreneurs can stand to profit much more with a lot less. With social media and digital marketing, a team of four can reach the same number of people as a company in the thousands.
Problem-solving – Big companies tend to be held back by years of dogmatic thinking and narrow-minded leadership boards. Small businesses and entrepreneurial ventures, in contrast, have younger spirits, willing to experiment and solve problems in creative ways.
Community – Small companies and entrepreneurs are like local heroes. They’re the ones sponsoring community events, the ones that get to know each customer on a personal level. They may not win the numbers game, but they’ll always have a loyal community (if they put in the time to cultivate one).
Passion – Most startups and small businesses were started out of passion, a deep yearning to make the world a better place. There’s something to be said about the personal satisfaction people receive from working with limited resources with a noble purpose in mind.
Risk and Uncertainty – No matter how many analysts or experts you hire, businesses are bound to experience some level of risk. These may include market conditions, the competitive landscape, or unpredictable consumer behavior. The best you can do is study the market and plan accordingly.
Workload – Entrepreneurs and small business owners should expect to work longer hours to ensure their company remains competitive. Without the resources of bigger companies such as HR, tech support, and sales, most people in a small business may have to work multiple roles or undesirable duties. Employees should be careful not to develop excess stress and burnout.
Financial risk – Small businesses, but entrepreneurial ventures even more so, must learn to manage certain cash flow limitations. Poor financial management can lead to stalled supply chains or even bankruptcy.
Key lessons to start a small business or entrepreneurial venture
Conduct market research. Before entering any industry, you need to do your due diligence. A SWOT analysis is a good starting point, but you’ll also want to analyze the competitive landscape, socioeconomic or geopolitical conditions (as it relates to your business), as well as the general market reception.
Validate your idea. Use a focus group even if it’s your friends or family. Share surveys and questionnaires that can bring you new insights. Develop an MVP (minimum viable product) or a prototype. These little experiments can help you determine whether your idea is really worth pursuing.
Focus on your value proposition. It’s easy to become distracted by industry trends, but you need to stick to what makes your brand unique (and it shouldn’t be price). Do you offer a more luxurious experience? Perhaps you speed up a slow or arduous process. Or maybe your product is unlike anything on the market. Focus on highlighting that value for your customers.
Build on your branding. Branding is what helps customers relate to a company. What colors, fonts, imagery, styles will you use to evoke your company’s personality? What vocabulary best represents your unique voice?
Develop your financial education. Most companies skip this step, but it’s also the most important. Without an understanding of how cash flow works, or how to manage your revenue, your company may end up in dire straits.
Build a road map. Strategy is key to winning long term. Create monthly and quarterly milestones to determine your company’s progress towards its goals. Only then can you judge whether you are on the right path, or if you need to revisit your tactics.
Choosing the Right Work Environment
Regardless if you’re a small business owner or an entrepreneur, it’s important to align everyone on your team towards that vision. A big part of your overall strategy is choosing where you work. Level Offices provide options for both kinds of leaders, from open areas that encourage discussion and networking, to private offices and suites just for your team. Book a tour with Level today.