I've had a conversation with some friends recently on the differences between a startup and a small business. One of my friends said that a startup in a brand new company, which aims to scale fast and become a large company, while a small business stays small and doesn't plan to scale. Examples for this definition of a startup may be Google, Facebook, Microsoft and Apple in their early days.
From what I read online, no one makes this distinction. What do you think - do you make a difference between a startup and a small business?
Variations of this have been asked before -- but as far as I can tell, not exactly the same, not what the difference between "startup" and "small business" is.
But AFAIK the answer is pretty much the same. There is no stringent, formal definition of what constitutes a "startup" or a "small business". These words are use slightly different by different people.
That said, I personally agree with your friend that "startup" implies higher growth ambitions. "Small business" is a more general phrase, used by fx marketeers or statisticians, and depending on the context it can mean anything from <5 man companies to <1000 employee companies.
http://en.wikipedia.org/wiki/Startup_company A startup company or startup is a company with a limited operating history. These companies, generally newly created, are in a phase of development and research for markets.
http://en.wikipedia.org/wiki/Small_business A small business is a business that is privately owned and operated, with a small number of employees and relatively low volume of sales. Small businesses are normally privately owned corporations, partnerships, or sole proprietorships.
from: http://www.businessinsider.com/small-business-entrepreneur-startup-which-do-you-identify-with-2011-3 or to summarize (my own words and experiences): startup :
some of the differences may transfer or overlap, but rarely (such as a small business can have high profits in rare cases, etc...).
In my opinion:
Startup refers to the state of a business in it's life cycle. In other words, it's been recently formed, and it's a relatively new business. Whether or not they intend to grow or stay small, a new company is still a startup.
Small business refers to the size of the business, and may refer to the number of employees, revenue, or net worth. A small business can be a startup that is still growing or an established company that is maintaining the status quo.
People frequently use the terms interchangeably, but that's because most startups start small. It doesn't help that the terms themselves are ambiguous with no firm definition or hard cutoffs.
Steve Blank definitely has a great insight on this.
The terminology he uses is "Scalable Startup". This is analogous to what this community refers to as the funded, go-big or go-home type of company. The only difference between a Scalable Startup and a Small Business (or lifestyle business as it's also referred to) is merely one of vision, risk, and personality.
And watch this: http://www.justin.tv/startuplessonslearned/b/262670582 In summary, Scalable Startups generally:
Small Businesses (the other 5 million in the US) generally:
It should be noted that there is nothing wrong with either type of business, and there is no bias towards a particular industry. Some people want to run a single bakery, others want to supply bread to every fast-food restaurant in the nation.
Just adding to @Jespers remarks.
So when is a startup not a startup? When its intended sunset is reached
Maybe when you revise your business plan and work out what you actually intend to do (the majority of businesses do this several times over).
... maybe just when you don't feel like its a startup business anymore.
My general view on where a company is a startup or small business is that this depends of the level of Risk/Return.
So, if a small bussiness is working in area of high level of returns (and level of risks) it is called a startup. In some point when the company establishes the returns and risk can decrease and the company becomes ordinary one. Calling some company Startup is somehow arbitrary and for investors (VC) more important are risk/return numbers.