small business owner

Why is Running a Small Business Easier than Running a Startup

startup

There are a lot of websites out there that want to help people launch their startup.  There are so many people who have a dream of turning their great idea into the next Lyft or Airbnb.  They want to make it big, essentially.  But what exactly is a startup? Taking a new idea and then growing from a small enterprise into a large business that dominates and alters the existing marketplace. Like Airbnb, for example.  The people who have these dreams seem to forget about the business owners who have been able to make a successful living without all the glitz and glamour.  These people run small to medium sized businesses (SMB) and focus on providing an established product to the market.

Running a small shop isn’t nearly as sexy as the next Silicon Valley unicorn, but in the European Union small businesses account for 2/3 of employment.  And they have some pretty sweet vacation rules over there, so this is something to think about!  Where am I going with this exactly?  Well, I am going to explain to you why this style of entrepreneurship is a better option.

1) Pre-Existing Market

Research shows that the top reason why startups fail is that there is no market for their product or service.  Which kind of makes sense, doesn’t it?  These startups are investing their time and money into an idea that nobody cares about yet. And maybe never will.  Just because you think it’s the best idea in the world, doesn’t mean that others think so.  Let alone want to invest in it.  Think about this in terms of SMB’s though.  What kinds of tasks do you “need” to do?  Your car breaks down, you need to fix it, so you go to a repair shop.  People need a place to stay, or eat.  Small business owners work in a market where there’s an already established demand for their product or service.  Which means, they don’t need to spend time convincing people that their idea is worthy.

startup

2) Immediate Profits

Yes, it’s true – some startups can become very lucrative, but most startups struggle for their first few years.  Even startups that are experiencing growth often operate at a loss.  In general, it takes startups an average of three years before they start to turn a profit.  Which is a long time.  Compare this to a small business owner who opens up a hardware store. While it’s true that sound marketing and managerial tactics are needed to draw customers to the business, the reality is that the store owner can start making direct sales and turning a profit on day one, making it much easier to achieve a financially stable position.

small business owner

3) True Ownership

Starting your own company costs money. Unless you or a family member has a lot of it, you’re going to need to get some outside sources of funding.  The difference between SMB owners and startups is who they get the money from.  Typically SMB owners will get a bank loan and use some of their own savings.  However, if you’re a startup, you’re going to need a series of investments from venture capitalists or other types of investors. This, in itself directly impacts the level of ownership and control you have on your own business.

For SMB owners, paying off the bank loan results in full, true, ownership of their company. On the other hand, startups that depend on outside investors typically trade away ownership to achieve the necessary funding. Over time, this whittles away their control, and some founders are eventually kicked out of the company they built from the ground up.

4) Less Risk

There is a low change of a SMB owner from becoming a millionaire overnight, but you also don’t have to worry about launching a product that nobody wants.  Or obtaining enough financing to help develop your so-called big idea.  You’re also far less likely to make the mistake of trying to grow too quickly.  There are still plenty of risks in running a small business, but when you’re able to look at other successful business models and enter a market with actual demand, you’ll be in much safer waters than if you dive into the startup world chasing an idea you hope people will like.

This doesn’t mean that an SMB is for everyone.  And it also doesn’t mean that you shouldn’t chase your dream, but it is the more conservative way of running your own business.  Both have pros and cons.  You have to decide what is best for you, and then go for it.