What is the difference between a startup and a regular SMB (small medium business)?

Startup Vs Small Medium Business (SMB)

The words Startup and Small Medium Business (SMB) are thrown around frequently, at times interchangeably. Most of the time, people often get confused with Startups and SMB.

The biggest difference between these two enterprises is their purpose. Smaller industries are driven by profitability and sustainable long-term value whereas startup keeps focusing on initial revenue and growth potential.

The fundamental difference for a startup and small business is that Startup is related to a time period (which was recently launched) whereas a Small Medium business (SMB) is related to the measurement (such as the number of employees, revenue).

The main difference between Startup and SMB

How these entities think about growth

Startup differs from traditional businesses because they are designed to grow faster. By design, this means there is something they can sell on the largest market. For most businesses, this is not the case.

Generally, a business does not require a large market to operate. You just need a market and should be able to reach and serve all of those within your market.

Online merchants can go to a big market by passing their time and space – customers come to buy things from you or use your products, regardless of wherever place you are in. The unique feature of the most startup is that they are not controlled by these factors.

Small Business Association gives it the best possible way:

“In the business world, the word ‘startup’ goes ahead of a company just getting off the ground. The term startup is as well related to a business that is normally technology-oriented and has high growth potential. Initially, Startups may face some personal struggles, particularly the financial one. That is for the reason that investors are in search of the highest potential return on investment while matching the associated risks. ”

And one thing that you need to keep in mind is, “Not all technology companies have a very large market”. To grow rapidly, you need to build something impressive that you can sell to a very big market.

The relationship with funding

Apart from having different ideas about “growth,” the startups are looking for different financial investment than small business operations. The startups depend on capital coming from investors or venture capital companies, and Small Medium Business activities may depend on debt and subsidies.

Interesting fact about venture capital is that it will have a more efficient role in any of the companies they provide. While a small business provided with a loan may occasionally need to report back to their bank, a startup with backing will probably be getting a bit more help. They will receive the investor’s advice if you are young and inexperienced; there is nothing better than help. This is true for those teams or individuals who will become part of an accelerator or insurance plan.

Planning for the exit strategy

Another thing you want to remember is your vision for your business. If you get into VC financing without an exit strategy, you do not have the chance to get it.

Venture investors need an exit strategy because they want to increase their ROI. If you want to run the company within 10 years, you would like to ensure that the exit plan comes in a fixed income stream format, allowing investors to pay, an IPO instead of buying out, or choosing a different strategy – your own financial or credit or subsidies, or government.

“Exit Strategy” development is not a problem for your own business, at least until you make it big or change your mind about owning the business. The fact is, in a traditional business (not a start), you do not need an exit strategy at the beginning. You will be fully responsible for your company’s future, whether you are running or not to sell or sell it to other parts of your life, to start or decide on the stock market, or you have to keep it down.

So these are the difference between a Startup and Small and Medium business (SMB). This is how both the business run and thinks while working for their development. If you still want to know more differences between start-up and small business, click here.

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