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The differences between a start-up and a private business

The differences between a start-up and a private business

Friday 22, 05 2020
Nowadays, people who are following a start-up trend, but how is a startup different from a private company or small business?

Innovation: Do you create a new thing?

For a small business, there will be countless examples of entrepreneurs who are already doing the same business model, such as restaurants, lawyers' offices, barbershop. You can even take advantage of their experience and turn it into your business idea.

For a start-up, Breakthrough is a must. As a startup, you can create something that has never existed on the market or a better value for what has already been available. For example, you could create a new segment in manufacturing (like a personal health measurement smart device), an entirely new business model (like Airbnb), or a unique and brand-new kind of technology (like the 3D printing technology).

Growth calculation: How much can your company grow?

Small businesses: Small and medium-sized businesses (SMBs) will be operated within a certain scope limited by the founder. In other words, the business owner himself will actively restrict growth and focus on serving a certain customer segment.

Startup: A startup will not set a limit for growth, and they have the ambition to grow to the greatest extent possible. They create great influence and thus can be considered as market operators

Growth rate: How fast can your company grow?

Small Business: It is obvious that you want your business to grow as quickly as possible, but your first concern will be to make a profit. Once you achieve this, you may think of expanding your business.

Startup: You will be passionate about growing the company as quickly as possible, and creating a growth-driven business model. You will want to duplicate your successful business model around the world.

Profit: How long will it take you to make a profit, and what is the profit value?

Small businesses: The founder will want to have revenue from the first day the business goes into operation, and it is better to be always profitable. The value of profit will depend on the amount of money the founders themselves want to earn (for themselves), as well as on the business expansion plan.

Startup: It may take months, even years, to generate revenue (given that it may be very small). You will focus on developing a product that is truly useful to users, in order to gain a large customer base. If the plan is successful, the financial returns can be enormous. For example, Uber is currently valued at around fifty billion US dollars.

10 Business Lessons For Startups

The differences between a start-up and a private business

Finance: How do you need to prepare your capital?

Small businesses: When you start establishing a business, in addition to your own money, you will need to rely on contributions from family, friends, bank loans, or capital contributions from investors. However, since the goal is to "survive", you will have to manage the money you are borrowing, so remember that this money will have to be repaid with interest.
Startup: Many startups start with the founders' own pocket or donations from family and friends. In some cases, crowdfunding is called. However, most startups have to borrow capital from angel investors and Venture Capital.

As a startup, you will have to hope for rapid growth and need a sufficient amount of capital to achieve this ambition. It will take a long time for you to generate revenue and be profitable. You should also keep in mind that startup investors will expect huge profits, so there will be compulsive pressure for founders. (It should be noted that there are many opinions that startups do not always need to rely on investment funds.)

Technology: Do you need to apply technology?

For a small business, it is not required, but there will be many technical tools to help run the company (such as accounting, marketing, etc.).

For a start-up, technology is often a typical feature of a product. Even if the product does not rely heavily on technology, startups still need to apply technology to achieve business goals and growth ambitions.

Company Life Cycle: How long can your company last?

Small businesses: 32% will fail in the first three years. However, this rate is still much positive compared to startups.

Startup: 92% of startups will fail in the first three years (unfortunately, this is the truth)

Leadership Skills: How many people you will have to manage?

Small businesses: The number of employees you have to manage depends on the operational plan you have planned in advance.

Startup: Because you want to grow as big and as quickly as possible, you will need to continuously develop leadership and management skills. Along with the growth of the startup, you need to have effective management with a number of "new members": employees, investors, advisory boards, and other partners.

Personal life: How will you balance your entrepreneurship and personal life?

Small businesses: If compared to startups, the risk level is much lower. This advantage can help you strike a balance between your business and personal life. However, since the company is yours, you must be ready to welcome challenges that you will not find in "9-5 jobs". It will always be difficult and challenging, but there will also be hope that you can balance it in a way that suits you.

Startup: If you receive capital from investors, you will be responsible for helping the company grow to a point when investors can maximize the level of profit. It is of extreme importance to always remember that there will be countless people counting on you, your product, and your success. The balance between work and personal life can be roughly defined as Work, work, work, and life.

Ambition: Can you leave to pursue a new project?

Small businesses: Your goal may be to pass on the company to future generations in the family or to sell it to a giant corporation.

Startup: Your ambition is a huge divestment path like offering shares to the public (IPO).


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