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Jared Jeffery Davis: Reasons Why You Can’t Call Your Startup a Small Business

Posted by on May 9, 2020 in Stuff with 0 Comments

It may sound confusing, but it is the fact that small business and startup are the two different models. If you don’t agree, then look at the journeys of Facebook and Walmart for some clarity. Walmart was a small business with one store. They made a profit and scaled their business to different cities in the country and around the globe. Facebook was an entrepreneurial venture, which, after establishing a successful social networking business, extended its reach to more universities, cities, and nations through a web app. Both of them made a product that the target audience enjoyed.

If you are already aware of the difference between building a small business and a startup, you can make smart business decisions. Here are some insights into this context.

Small business doesn’t have to search for a business model unlike a startup

When you run a small business, you already have a business model in place. Walmart followed the retail model that has been there for ages and differentiated itself by offering lower prices. Startups don't have this. They have to find out a business model first and prove it before implementing it. They reach there after iterations and pivots. Why startups do this is because they are innovation-driven, in which technology plays a critical part. When you talk about innovating something, you have to test, validate, adjust, and adapt. When a startup replicates a business model, it is no longer a startup. It will turn into a small business.

Small business is about making money and profit, while a startup needs to search for a revenue model first

As a startup entrepreneur, you have to answer how you will make money and profit. A small business owner has to think about when he can turn profitable. Startups have to find out the suitable revenue model so that they can make money, while small businesses are always about profit-making from the time of their origin. For instance, if you start a restaurant business and fail to churn cash in the three months, it can be indicative of the failure. However, if you start up and don't earn for the first year, it is quite normal because almost 99% of new startups go through this. While small businesses don't have to bother as much about the risk of failures and money-making, startups can take advantage of scalability.

From this, what is evident is that small businesses tend to be full-proof and moneymakers. They don't have to validate the processes. In the case of startups, the huge advantage is the ability to scale up quickly. So, if you are an aspiring and ambitious entrepreneur, it is critical to note that your goal should be to discover a repeatable and expandable business model with the help of technology.

Some people assume that one can launch a startup following a small business model. But it would help if you did not fall for it as it can prove disastrous for your entrepreneurial journey. Remind yourself that you cannot have a business without a business model. For this, you have to go on validating the processes to finally arrive at the right pricing, positioning, categorization, product delivery, and so on.

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