If you have a great business idea, you might be wondering how to turn it into reality. You might also be confused about whether to start a small scale business or a startup. What are the differences between these two types of ventures, and which one is more suitable for your idea?
In this article, we will explain the main characteristics, advantages, and challenges of small scale businesses and startups. We will also help you decide which path to take based on your personal goals, preferences, skills, resources, and risk appetite.
But first, let’s define what we mean by small scale business and startup.
What is a Small Scale Business?
A small business is a for-profit, independently owned and operated business that does not have national or international reach. A small business typically serves a local market, has a limited number of employees, and generates moderate revenues. Examples of small businesses are a local bookshop, a pet store, or a boutique interior design firm.
According to the U.S. Small Business Administration (SBA), there are 33.2 million small businesses in the U.S., accounting for 99.9% of all businesses and employing 46.4% of all workers. Small businesses are vital for the economy, as they create jobs, foster innovation, and contribute to the community.
Advantages of starting a small business
Some of the advantages of starting a small business are:
- You can use a tested business model, which reduces the risk of failure.
- You can have more control over your operations, finances, and decisions.
- Benefit from tax deductions, grants, and other incentives from the government.
- Build loyal relationships with your customers and suppliers.
- You can achieve work-life balance and personal satisfaction.
Disadvantages of starting a small business
Some of the challenges of starting a small business are:
- You may face stiff competition from other small businesses or larger corporations.
- Limited access to capital, talent, and technology.
- You may have to deal with regulatory compliance, legal issues, and administrative tasks.
- You may have to cope with market fluctuations, customer preferences, and industry trends.
- Less potential for growth and scalability.
What is a Startup?
A startup is a young company that has developed a unique business idea and aims to make an instant impact and take over the market. A startup typically operates in a high-growth industry, such as technology or biotechnology, and has the potential to disrupt or create a new market. Examples of startups are Airbnb, Uber, and Snapchat.
A startup is different from a small business in terms of its growth intent. A startup is looking to grow fast and become a large company or even a global leader in its field. A startup is also willing to take more risks and experiment with different strategies to achieve its vision.
According to TechCrunch, there were 5 million new businesses created in 2020 in the U.S., many of them startups. Startups are important for the economy, as they drive innovation, create new jobs, and solve problems.
Advantages of starting a startup
Some of the advantages of starting a startup are:
- You can pursue your passion and vision, and make a difference in the world.
- You can attract investors, partners, and customers who share your vision.
- Leverage technology, data, and networks to reach a large audience and scale quickly.
- Enjoy creative freedom, flexibility, and autonomy.
- You have more financial upside if your startup succeeds.
Disadvantages of starting a startup
Some of the challenges of starting a startup are:
- Can face uncertainty, ambiguity, and failure along the way.
- May have to deal with high competition, customer expectations, and market changes.
- You may have to sacrifice your time, money, and personal life for your startup.
- Have to cope with stress, pressure, and burnout.
- You may have to pivot or change your business model frequently.
How to Choose Between a Small Scale Business and a Startup
There is no right or wrong answer when it comes to choosing between a small business and a startup. It depends on your personal goals, preferences, skills, resources, and risk appetite. However, here are some questions you can ask yourself to help you make the decision:
- What problem are you trying to solve? Is it a local problem or a global problem? Is it an existing problem or an emerging problem?
- What solution are you offering? Is it an improvement on an existing solution or a completely new solution? Is it easy to replicate or hard to imitate?
- Who are your target customers? Are they individuals or businesses? Are they located in one area or spread across different regions? Are they niche or mass market?
- How do you plan to make money? Do you have a clear revenue model or do you need to experiment with different options? Do you need external funding or can you bootstrap your business?
- How fast do you want to grow? Do you have ambitious growth goals or are you comfortable with moderate growth? Do you want to dominate the market or coexist with competitors?
- How much risk are you willing to take? Are you prepared to face uncertainty and failure or do you prefer stability and security? Are you willing to invest a lot of time and money or do you want to minimize your costs?
Based on your answers, you can determine whether a small business or a startup is more aligned with your vision. Remember, there is no one-size-fits-all approach to starting a business. You have to find the best fit for your idea and yourself.
Starting a business is an exciting and rewarding journey, but it also comes with many challenges and risks. Whether you choose to start a small scale business or a startup depends on your personal goals, preferences, skills, resources, and risk appetite.
A small scale business is more suitable for you if you want to serve a local market, have more control over your operations, benefit from tax incentives, build loyal relationships with customers and suppliers, and achieve work-life balance.
A startup is more suitable for you if you want to pursue your passion and vision, make an impact in the world, attract investors who share your vision, leverage technology, data, and networks to reach a large audience and scale quickly, enjoy creative freedom, flexibility, and autonomy, and have more financial upside if your startup succeeds.
Whatever path you choose, remember that there is no one-size-fits-all approach to starting a business. You have to find the best fit for your idea and yourself.