Startup vs Small Business: What's the Difference?

If you were to walk up to someone and ask them “What is the difference between a startup and a small business?”, they would probably shrug their shoulders, look at you like you’re crazy, and say “I don’t know.”

The truth is that there’s no difference; the two terms are often used interchangeably. However, here’s what we’ve found: Startups generally have less than fifty employees. Meanwhile, small businesses can be anything from mom-and-pop shops to chains throughout the country.

So if we had to pick one of these terms — we’d pick ‘small business.

Regardless of where you go, you’re bound to come across startups and small businesses. In the United States alone, more than four million firms fall under these categories.

When it comes to technology, there are tons of great companies that fall under these two terms. Some of these companies include: Twitter, Tumblr, Netflix, Uber and Airbnb. These companies make life easier for consumers — and for business owners — and they usually start out in a garage (like Hewlett-Packard did).

For startups, it’s all about innovation to create something new and useful. However, small businesses create something brand new and useful for consumers.

Today we’re going to look at the two terms that are used interchangeably with one another. Read on to see what’s similar between a startup and small business.

What is the Definition of a Startup?
There are no rules when it comes to defining these terms. When you’re in business, you have to be ready to take on the risks that come along with being in business with people who don’t have your best interest at heart. That’s one of the reasons why so many startups fail only a short time after they begin working for their customers.

Don’t get us wrong, most businesses fail. However, they’re most likely not startups; they’re small businesses.

According to dictionary.com, a startup is: one that is new and developing only recently; a business that is newly formed and at the beginning stages of development (often with less than demonstrated promise).

To clarify — A startup is a business with possibilities; the potential to grow and expand — but not necessarily always. A large company can also be considered a startup — since you don’t typically know how it’s going to turn out at the beginning of its development (like LinkedIn or Netflix).

And that’s why the terms are used interchangeably. You can’t really throw out “small business” because it’s still a startup; you just don’t know how it’s going to turn out.

What is the Definition of Small Business?
The definition of small business is more specific than that of startup. According to dictionary.com, small business is: an independent enterprise owned and operated by one person or a closely held group (as opposed to a corporation) often engaged in retailing, wholesaling, manufacturing, real estate development, etc.; small-scale entrepreneurial activity (as contrasted with large-scale industrial enterprises).

To clarify — Small businesses are not huge companies that require hundreds of employees. Often, they’re essentially a one-person operation — and they don’t always need to be big in order to succeed.

Companies can be small or large — but even then, they still fall under the same category when it comes to small business and startup.

As you can see, when it comes to these two terms — there’s no difference at all. They’re used interchangeably because startups and small businesses both start off as a new business idea with the possibility of building a multimillion dollar company in the future. The only difference is that a startup is a newer company with potential for growth, while a small business is already established and ready for expansion. For more information, click to read more about tips and tricks on growing your startup.

That’s why startups and small businesses are used interchangeably — because they’re both just new companies.

If you’re a small business owner — you probably don’t care if you’re referred to as a startup or small business. You probably just want your customers to know that you’re promoting an awesome product or service that’s going to change their lives — and hopefully, theirs! If we had to pick one of these terms — we’d definitely go with “small business.

What is the Difference Between a Startup and a Small Business?