Key Difference – Small Business vs Entrepreneurship
Small business and entrepreneurship are two terms that are often confused and used interchangeably; thus, it is important to understand the difference between small business and entrepreneurship clearly. While most entrepreneurial ventures start out as a small business, not all small businesses are entrepreneurships. The key difference between small business and entrepreneurship is that a small business is a limited scale business owned and operated by an individual or a group of individuals whereas an entrepreneurship is defined as the process of designing, launching and operating a new business, which usually starts as a small business and pursues growth. Many companies that are immensely successful have started out as entrepreneurships.
CONTENTS
1. Overview and Key Difference
2. What is a Small Business
3. What is an Entrepreneurship
4. Side by Side Comparison – Small Business vs Entrepreneurship
5. Summary
What is a Small Business?
Small business is a limited scale business owned and operated by an individual or a group of individuals. A small business is convenient to manage. Thus, some individuals and groups prefer such simplicity. The main aim of a small business is to make profits; however, the profit making ability is limited in a small business since the owner/owners do not wish to explore new business opportunities. Sole proprietorships and partnerships are the most common types of small businesses.
Sole Proprietorship
A sole proprietorship is the simplest and most convenient structure that can be used to start a small business. This is a business owned and operated by an individual. Profits and losses are borne by the owner since he or she is unlimitedly liable for the debts of the business.
Partnership
A partnership is an arrangement in which two or more individuals share the profits and liabilities of a business venture. In some partnerships, all partners share profits, losses, and liability equally. In other business arrangements, some partners may have limited liability.
Obtaining finance is a major barrier to a small business since financing options such as venture capital, and business angels available for startup companies with a high growth objective may not be available for a small business due to the lack of growth objective. Thus, many small businesses are financed through personal capital and bank loans.
Figure 01: Small business conduct operations on a limited scale, often restricted to a limited geographical area.
What is Entrepreneurship?
Entrepreneurship is defined as the process of designing, launching and operating a new business, which usually starts as a small business and pursues growth. Entrepreneurship is started by an ‘entrepreneur’. It is difficult to separate the entrepreneur from the entrepreneurship since the success of the entrepreneurship is a result of the vision of the entrepreneur.
E.g. Walt Disney was fired from Missouri newspaper for “not being creative enough” at the age of 22. Disney then acquired Laugh-O-Gram, an animation studio which went bankrupt. He faced a lot of challenges; however, succeeded due to his creative vision and effective imagination ability. Today, Walt Disney Company is the world’s largest animation company
Figure 02: Disneyland, a theme park by Walt Disney Company is a major revenue-generating line of business for Disney
Further, companies such as such as Apple, Amazon, Google and Harley-Davidson also became successful due to the creative vision of their entrepreneurs. As such, successful entrepreneurs have the below traits.
- Create a competitive advantage
- Build an extremely capable business team
- Be technologically advanced
- Hardworking and be dedicated
- Risk taking ability
- Successful money management
Entrepreneurship also starts as a small business; however, it will grow rapidly since the entrepreneur/ entrepreneurs are constantly looking for opportunities to change, take more risks and grow the business. They are keen on taking every opportunity that comes their way. Further, unlike in a small business, their main objective is not making profits, but to do business creatively and sell a unique product or service.
What is the difference between Small Business and Entrepreneurship?
Small Business vs Entrepreneurship |
|
| Small business is a limited scale business owned and operated by an individual or a group of individuals. | Entrepreneurship is defined as the process of designing, launching and operating a new business, which usually starts as a small business and pursues growth. |
| Business Expansion | |
| Business expansion is very limited in small business since the owners are not exploring new opportunities. | Entrepreneurships are subjected to fast business expansion. |
| Types | |
| A small business owner’s primary motive is to make profits. | Primary motive of an entrepreneur/ entrepreneurs is to introduce a unique product or service to the market. |
Summary – Small business vs Entrepreneurship
The difference between small business and entrepreneurship mainly depends on the persuasion of growth. If the owner/ owners of the business are content with the manner in which the business is currently operating and do not wish to engage in more growth opportunities, then it can be categorized as a small business. On the other hand, if the entrepreneur/ entrepreneurs operate their business with a clear and creative vision and are interested in expansion opportunities, this type of business is an entrepreneurship. Since small businesses do not pursue growth, they remain small or medium scale throughout their lifespan. However, this does not mean that they are not successful; some small businesses may be cash rich.
Reference:
1.”10 World Famous Companies that Started in Garages.” Young Entrepreneurs. N.p., 17 May 2015. Web. 05 May 2017. <http://www.retireat21.com/blog/10-companies-started-garages>.
2.”List and Explain the Characteristics of a Small Scale Business.” Chron.com. Chron.com, 26 Oct. 2016. Web. 07 May 2017. <http://smallbusiness.chron.com/list-explain-characteristics-small-scale-business-10472.html>.
3.Fernandes, Paula. “What is Entrepreneurship?” Business News Daily. N.p., 21 Mar. 2016. Web. 07 May 2017. <http://www.businessnewsdaily.com/2642-entrepreneurship.html>.
Image Courtesy:
1.”2193055″ (Public Domain) via Pixabay
2.”1241413″ (Public Domain) via Pixabay