Growth, growth, rapid growth… you heard this small business vs startup theme all over the media for the last few years. Growth hacking has become the most common way of describing almost anyone in the business services. An entrepreneur is expected to start today and have viable business almost overnight, from an idea to the market. We know it as a startup. It seems though that the startups have peaked already – VC capital has spread from Silicon Valley to most major cities and every university has an Accelerator Hub. Valuations of Unicorns have fallen and apps are much harder to market these days. So is a startup superior to a small business?
What’s the difference? Structure, intention, growth strategy.
Startup tries to take off with an idea to the market in the fastest possible way, using any resources available – people, money, experts, grants to show how it is scalable and expandable globally. It’s a proof-of-concept to make it saleable for the highest possible price, in the shortest possible time. And that’s the problem. Not as easy as it seems in the media. 90% of startups fail within 2 years. At the same time you have to give it to the Startups: ones that are working, provide on the ongoing basis the biggest employment growth in North America (via 2010 Kauffman Foundation study)
Small business on the other hand, doesn’t have that much growth pressure. Yes, the Entrepreneur needs to make a living rather sooner than later, but once this is achieved, you can go as slow or as fast as you can and want. Every small step toward establishing a solid business accumulates like the compounded investment. Only 30% of small businesses fail in the first 3 years. And although there are still ups and downs in the economy and sales are rarely uniform over time, most of the small businesses can prosper at a plateau level without bigger problem for a longer period of time than a startup would.
Why not? Because once a startup gets to IPO stage, other forces for growth and profitability prevail. Now other people (investors and shareholders) have a say what works or does not work for them and in which direction that business should go. There is no stable prosperity – pressure is on growth, at any cost. And once business starts to cut corners, look for everything cheaper and faster, it fails the Consumer.
How to not be a startup
The best startups work a lot like cults, says Peter Thiel.
Google works like a cult, sort of – they provide employees everything they need to never leave the compound, I heard.
Accenture – the world’s largest consulting company is the opposite of a cult and an opposite of a startup.
Its attachment to the employees is said to be loose & temporary. One of its first jobs as a small business was a feasibility study of installing a computer in a workplace. After 60 yrs they are not only still in business of IT, but serving 94 out of Fortune Global 100, with almost 400k employees in 120 countries.
Long lasting company – an opposite of a startup, may change the owner and even the name during its history, but the services provided stem from the same core, however evolved with time and technology. At one point Accenture was characterized as a series of related partnerships and corporations under the control of its partners through the mechanism of contracts with a foreign coordinating entity.
A Small Business is not built overnight. Contrary to a popular wish, it takes years and years of consistent efforts to maintain a small business. It’s not luck, but hard systematic work and constant value proposition contest. Gary Vaynerchuk stresses repeatedly that it takes time to build something good. You don’t need rounds of financing to live your dream, change the world, help people, be entrepreneurial.
There are so many small businesses in Canada that are not growing, that import/export courses are the staple of entrepreneurial training at the municipal government programs, trying to break the perceived barriers to growth at an instructional workshops level.
Small business also does not need to be at the edge of innovation or discovery.
In fact there are more business services than actual businesses with non-service ideas. It reminds me the Gold Rush, where gold miners were struggling on the front lines of dangerous and hard work, while service businesses supporting them (like taverns and snake oil salesmen) made more money in the back trenches.
Although small business will likely not reap you the exit rewards that the startup does, it would very likely provide you with a life-long income that is mostly dependant only on your work and creativity.
Putting accent on creativity
“As the waves of disruption come ever faster, the only way for a company to be competitive will be to behave like a startup” says Startup Genome Report. This may mean a lot of changes, but small business which has expertise in almost every aspect of …well, running a business, is better suited to withstand the disruption than a startup put together based on a single idea. “On an individual level, the brightest people worldwide, are increasingly seeing entrepreneurship as the career path of choice.”
And this may just save the world… we, individuals have the power.