Startup Versus Small Business

Common sense might tell you that startups and small businesses are one and the same. Truth be told, there is a fundamental difference between these two types of entrepreneurial firms. The biggest difference between a startup and a small business is the end goal. Owners of a small business generally seek to make large profits and grow their company. The objective of a startup is typically growth and future revenue. Since startups aren't as well known, I will cover some basic principles and explain some goals that are key to a successful startup.

Two weeks ago I got the opportunity to listen to Drew Winship speak on startups. Drew has been the CEO of a startup for close to five years and he shared his successes, failures, and what he would change if he got to do it all over again. One of the more surprising statements he made was that you should aim for your startup to be worth fifty million dollars within five to seven years. That seems like a lot of money right? He explained the equation to get this figure.

$2.5 million (post-money) / 5% (chance of success) = $50 million 

The money raised should be divided by the chance of success to get the revenue wanted should you plan to sell your company in the near future. Drew also went into the logistics of how that money is split up and by the time you factor in taxes, wages, repaying investors, and time spent, you have a small portion of a seemingly large liquidation sale. Then you might also have to split whats left between owners. Although Drew said startups were ideal for him, small businesses might be preferred by others. According to Neil Thanedar (2012), "Establishing a successful small business can build credibility and be hugely valuable when launching a startup." So when deciding whether you want to create a startup or small business research the facts and see what aligns more with what you want.

Works Cited

Council, Y. E. (2015, February 17). Are You Building A Small Business - Or A Startup? Retrieved February 24, 2017, from https://www.forbes.com/sites/theyec/2012/08/15/are-you-building-a-small-business-or-a-startup/#4465be9a528a