Too many look at startups and small businesses and assume that they are the same thing. In reality, though, they are quite different. While they have some similarities, they are not the same thing at all. The two words are not interchangeable.

Luckily, it is easy to tell them apart. See the video for the quick explanation:

If you are considering going into business on any level, you should make sure that you understand their differences. Knowing what a startup is and knowing how it differs from a small business will help you when navigating the business world.

It’s pretty easy to tell them apart, especially if you know the intentions of the business owner and the business’s potential future.

We are going to highlight only the principal difference between startups and small business in this article. However, there are still certain less important and rather formal differences between them such as funding, ownership etc.

Before we go in depth it is important to note that startups can be compared only to new small businesses. Startups are always new. When they are not new anymore then they have probably become huge and accordingly ceased being a startup or they just winded up.

So, here we go.

Small businesses are small

First, look at a small business. Most likely, you know what one is. There is not a lot of mystery here.

A small business is a locally owned business that has a small number of employees, a relatively low cost and income, and no plans to become a corporation. Many of them operate as sole traders and put off or not follow through with forming a company.

These low risk, low reward businesses tend to remain the same for years. They continue to make money, though not a lot, and stay in their area. Very seldom do these types of businesses grow into something bigger.

Small business is an ice cream shop in your district or your favorite local coffee shop for instance.

 

Read also: What is the Difference Between Firm and Company?

 

Startups are also small but they dream big

A startup, on the other hand, may begin in the same way as any business, including a small business, but it has greater aspirations. Startups want to become huge.

Their motivation is money, popularity, and success, and they go for it. Larger investments, early company formation, and marketing all go into building a startup.

This leads to a higher risk, higher reward system. While startups have a lot more to gain, they are also more likely to fail. When they do well, though, they do very well.

However, many people look at startups from the perspective of business phase. They consider any new business to be a startup at the very outset of its life.

This approach is different from Silicon Valley style vision with its tech startups and therefore seem slightly outdated.

Startup notion nowadays transformed into something more than just a newborn business.

It is about the ambition, level of dedication, dream and threshold. It’s when you desperately refuse to stay small. Startups are born to be big. To be big or die.

However, the major difference is how they view their respective futures.

Small businesses are about success, obviously, but they focus more on maintaining local popularity and manageable income rather than going big.

Startups are more about gaining ground and becoming a big hit, something that can make a lot of money but can fail easily.

The fundamental difference between startup and small business appears to be the mindset.

Startups want to change the world.

Small businesses are fine being small, stable and profitable.

Further Reading: Top 25 Startup Hubs in the US [2016]

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