I hear these three terms used interchangeably, but in my mind, they all mean slightly different things. It’s semantics, of course, but here’s my take on what these three words mean. Which do you identify with the most?
Wikipedia: A small business is a business that is privately owned and operated, with a small number of employees and relatively low volume of sales. Small businesses are normally privately owned corporations, partnerships, or sole proprietorships. The legal definition of “small” varies by country and by industry, ranging from fewer than 15 employees under the Australian Fair Work Act 2009, 50 employees in the European Union, and fewer than 500 employees to qualify for many U.S. Small Business Administration programs. Small businesses can also be classified according to other methods such as sales, assets, or net profits.
Me: In my mind, small businesses are those boutiques, hair salons, yoga studios, etc. you walk by downtown. “Small business” to me connotes a brick-and-mortar location. Employees are a must, even if it’s your wife and daughter. Small businesses may use more “old school” forms of marketing, like print ads or television commercials, rather than social media and the internet.
You might have a small business if…
- You’re a member of your Chamber of Commerce.
- You have a family business passed down through generations.
- You work 100 percent (or 150 percent) at your small business (it’s your full-time job).
- You sell or manufacture a product.
Wikipedia: An entrepreneur is a person who has possession of a new enterprise, venture or idea and is accountable for the inherent risks and the outcome. The term was originally from the French and was first defined by the Irish-French economist Richard Cantillon. Entrepreneur in English is a term applied to a person who is willing to launch a new venture or enterprise and accept full responsibility for the outcome. Jean-Baptiste Say, a French economist, is believed to have coined the word “entrepreneur” in the 19th century – he defined an entrepreneur as “one who undertakes an enterprise, especially a contractor, acting as intermediatory between capital and labour.”
Me: This is the one I most identify with. Entrepreneurs may have employees, but often go it alone as solopreneurs. They’re willing to take risks for the reward (though maybe not as much as a startup). Entrepreneurs are all about social media, at least the ones I know.
You might be an entrepreneur if…
- The idea of failure doesn’t scare you…too much.
- You use social media to market your business…and do it all yourself.
- You tend to do all the work and have trouble delegating
- You have started more than one business (successfully or not).
Wikipedia: A startup company or startup is a company with a limited operating history. These companies, generally newly created, are in a phase of development and research for markets. The term became popular internationally during the dot-com bubble when a great number of dot-com companies were founded. A high tech startup company is a startup company specialized in a high tech industry.
Me: I definitely think of tech companies when I think of startups, although I see non-tech companies claim the title. To me, startups are like fuses: They light brightly very quickly, but the fuse is short. At the end of it, the startup turns to another form, like part of a corporation that buys it, or it becomes a small business. Also, I tend to associate getting funded or working with angel investors with startups only.
You might be an startup if…
- You’re starting your company while working 40 hours a week at a day job.
- You fly to Silicon Valley at the drop of a hat to meet someone with deep pockets and good contacts.
- You know what a term sheet is.
I realize this post will incite some aggressive great dialogue around the definitions I’ve laid out here, and I welcome it. After all, it’s all subjective, isn’t it?
I’d say I’m an entrepreneur. Not yet interested in getting to own a small business, having employees would make it harder to have the type of free lifestyle I love.
Nice article! I fell definately like an entrepreneur, even like a well unknown… until now 🙂
I identify with being an entrepreneur. Great question.
I’d like to become a small business, someday.
The Franchise King®
Very interesting to me that you read this blog – Small Business Trends — and yet identify as an entrepreneur. Me too! And Ramona–interesting point on small businesses having employees vs entrepreneurs not!
I think your point about inciting “
aggressive” great dialogue is a good one! 🙂
Now, I look on this much differently. I see far more overlap than differences among all three terms. Consider that:
– I run a small business — it’s small simply because of its size. All that small business connotes in my mind is your size status.
– I am an entrepreneur because in my opinion that is more of a personality characteristic. Entrepreneur is often synonymous with small business owner — many small business owners are entrepreneurial in approach. I was and still am an entrepreneur, because that’s about my personality and values and approach.
– My business used to be a startup. Startup has to do with the stage of growth your business is in. My small business was a startup during the early years — because I started it up! LOL Now that it has been around longer, it is no longer a “startup” because, thank goodness, we managed to survive and thrive past the startup stage.
Very good points. I agree that they overlap. For me, “startup” denotes more technical business in nature, and one looking for funding. That’s not me. I was watching The Shark Tank (great program, by the way) and realized that because I couldn’t pitch my business to investors, I didn’t feel like I fit in the area of startups.
Interesting article! I agree with Anita…they all overlap to some degree. What was most interesting to me however was where you said, “Also, I tend to associate getting funded or working with angel investors with startups only.” I will definitely disagree because my company not only helps entrepreneurs in the startup phase, but also small businesses who may be struggling to get their business off the ground. I believe funding can be provided at various points as long as the business or idea is a viable one.
Sounds to me like you could make a pretty good Venn diagram that shows the unique area and the overlap without focusing too much on the vernacular.
*I’m working 40 hrs/week while getting my business off the ground.
*I offer a service to business clients on a contract basis.
*I do all the work – because I’m a one-person outfit by definition.
*My marketing is via social media/networking.
I’m a freelancer. I also consider my company a small business.
Free Business Valuations
Small businesses, in the U.S., are defined by the SBA as (typically) less than $7.0 million in sales for most service companies or less than 500 employees for manufacturers. There are specific limits for every NAICS code, however. That said, these are formal definitions used in determining eligibility for government guaranteed (SBA) lending programs and conversational usage of the term “small business” is most likely similar to what you have described. I do, however, disagree that these firms are constrained by traditinoal marketing. My intuition is that these firms are actually much more willing to shift marketing dollars to the digital world than are there larger competitors since they are more likely to track results instead of budgets and most PPC marketing is self-serve and geared towards small business owners. Good article!
Like many folks, I can see an overlap between entrepreneur, start-up, and small business. It’s not just a stage, but a state of mind. Many of our clients at TVADS.TV are somewhere between these three stages, and we specialize in helping this type of business.
@1NewIdeaKen– I should clarify: startups are usually looking funding rather than not. But you’re correct: any business can seek funding at any stage!
@Robert–Great! Why don’t YOU put one together for me? 🙂
@Bill– Ahhh. Freelancers. Didn’t even bring them into the equation. But I think we’ve all considered ourselves freelancers to a point where we realize we’re running a business, wouldn’t you agree?
@Free Biz Valuations– Thanks for the stats and input!
@Vera–“state of mind.” I like that!
Glad to know people multi-identify!
It’s always good to define terms because it reveals how amazing it is that we communicate at all. I do take issue with the idea that social media play any part in distinguishing between small business, entrepreneur, and start-up. All three types of business were around long before social media were invented. Of course, I also take issue with the SBA defining a small business as one with 500 employees.
Small business: I’m with you. It’s the yoga studio, boutique or wood-working company that employs a few people. Entrepreneur is the person with the courage to take a risk on starting a business, but it’s also about changing the way things are done. The yoga studio may have created a process that ensures the quality of the instructor and experience is so outstanding and consistent they can franchise what they’re doing and roll it out across the country.
I meet lots of small business owners who are not running bricks and mortar businesses: online small business is a great niche (and they think of themselves as small business owners, not entrepreneurs). I actually do use small business owner and entrepreneur interchangeably: to me, small biz is about scale/size … a number of small business owners/entrepreneurs grow to be mid size or large size business owners (but those ‘labels’ don’t sound so good – small business sounds very ‘niche’; mid or large sounds awkward).
I make multiple small businesses that run themselves without any intervention. Some earning as low as $1-$10 per day, but that have been consistently running for 5 or 6 years now. I try not to define what I am, as I do not really know anybody else that does the same. I just keep finding new ways of earning an extra couple of dollars each day, as long as its an automated process that I can leave on autopilot. I would say entrepreneur but I purposely go for things that have zero risk so I don’t fall into that category either.