Small businesses and Entrepreneurial ventures are essential as they contribute to economic development. They also lead to improved living standards by creating opportunities for people who would otherwise be jobless.
Even though small businesses and entrepreneurial ventures flood the market, most people do not differentiate between the two ventures. And in most cases, they tend to use them interchangeably.
While they share some similarities, the two are different in most aspects, including their objectives and implementation. In this article, we will discuss the various aspects of the two ventures to help you gain a clear-cut understanding of each.
- What Is A Small Business?
- Types of Small Businesses
- Characteristics of Small Businesses
- What Is Entrepreneurship?
- Types of Entrepreneurs
- Characteristics of Entrepreneurship
- The Differences of Small Business Vs. Entrepreneurship
- The Similarities of Small Business and Entrepreneurship
What Is A Small Business?
A small business is a venture which is owned and controlled by one person or few people. The owners of the business are the ones in charge of decision making and capital contribution.
Since their main objective is to maximize profits, most small businesses are less likely to take up new market opportunities as entrepreneurs do.
Types of Small Businesses
There are various types of small businesses, including sole proprietorship, and partnerships as discussed below:
Sole proprietorship is an unincorporated business that is owned and controlled by one person. The owner generates all the capital and enjoys all profits generated from the business.
The only drawback of a sole proprietorship is that the business owner is responsible for all business liabilities, including the business taxes and capital contribution.
A partnership is a formal agreement between two or more people to start and manage a business, with a common objective of generating profits. The profits generated in this form of business arrangement are distributed among the shareholders depending on the partnership type.
In general partnerships, the profits are shared equally among all members of the partnership. The same case applies to the liabilities of the partnership business.
In limited partnerships (LP), some members are liable for the business’s debts while others (silent partners) are not. The sharing of profit depends on their agreement. And, in most cases, the active partners receive a more significant share.
In limited liability partnerships (LLP), all members are liable for the company’s debts but are exempt from the liabilities from the other partner’s actions. Their profit sharing depends on their capital contribution or otherwise, as their agreement stipulates.
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Characteristics of Small Businesses
Before checking the difference between small business vs entrepreneurship, let us find out a few Characteristics of Small Businesses.
They Have Low Sales Turnover
Most small business owners are not willing to take risks. They will only operate within the area where they are located without the effort to reach out the customers in other regions.
Their sales remain low or stagnant due to a lack of new customers to boost the sales. The low number of sales translates to low profits.
They Have Limited Resources
Small businesses have limited access to business financing, human resources, educational resources and physical resources like building and equipment.
The lack of enough resources limits them from achieving their operational efficiency hence low income.
Small Management Body
Business owners are responsible for making the business decisions like capital allocations and sharing of profits.
Small Capital Requirements
You only require a small amount of capital to cater for the required number of machines, human labour and the business stock.
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What Is Entrepreneurship?
Entrepreneurship is the process in which a person identifies a business opportunity and creates a business from it. The person who engages in this risky business is called an entrepreneur.
Unlike small business owners, entrepreneurs are willing to venture into new businesses despite the risks involved while anticipating a profit.
Types of Entrepreneurs
There are different types of entrepreneurs, including:
These are individuals who operate their businesses from their homes. Running a business from home generates indirect income for their business.
They are free from the transportation and rental costs that they could otherwise incur by offering their services from elsewhere. Using that strategy can take your venture off the grass, just like Apple Inc. and Disney.
However, the strategy can only perform better in today’s market if you augment it with online marketing.
Online Business Owners
These are businesses that offer their services virtually. Operating virtually today gives them access to a large number of customers with smart devices. The strategy can change your business into a prominent online store like Amazon and eBay.
A serial entrepreneur generates new ideas continuously and then converts them into businesses. They own multiple businesses due to their enterprising spirit, and they can operate both physically and online.
Characteristics of Entrepreneurship
Below are some of the character traits that every entrepreneur must possess.
Ability to take risks
To be a successful entrepreneur, you must have the courage to take risks. However, this does not mean you jump into implementing any business idea blindly. You should plan well and work hard towards converting the newly founded opportunity into success.
In a world where almost everything has been tried, you need to be extra innovative to make it in whichever market you are operating. Typically, being innovative implies generating unique ideas which you can implement and make colossal amounts of profits.
The innovation could involve improving the existing products in the market, introducing an entirely new product or even introducing a new process where you can be producing the same products but in a more efficient manner.
For instance, the innovative spirit can be noted in capital intensive industries that increase their production efficiency by replacing human labor with machines.
An entrepreneur should be future-oriented. They should monitor their progress in the present and set goals for the future.
For instance, if you are producing ten bags of sugar in your new processing firm, you can set a target of 50 sacks by the end of two months and then strategize on achieving your target.
One good thing about setting goals for the future is that they give you a sense of direction. You remain focused until you achieve your target.
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Where do leadership skills come into the application? In an organizational set-up where there are many production departments, a single person cannot accomplish all the tasks without assistance.
Also, teams from different departments cannot achieve the organization goals without proper coordination and the right motivation. That is where leadership skills come into application.
As a skilled leader of the company, an entrepreneur will use their expertise to learn every employee’s strengths in the organization and then channel them to their specialized departments.
They would also use the available resources to incentivize them to push more to realize your organization’s goals.
A good entrepreneur should see opportunity in every situation. That is, you must be willing to analyze every idea that you come across to see how you can convert it into a viable business.
However, being opportunistic does not mean that you are unable to think. Instead, it implies looking at things from a business angle to avoid losing the best opportunities.
An entrepreneur should be well informed in the subject of their business. In other words, you should only implement ideas you are knowledgeable about.
For instance, if your idea is becoming a coffee dealer, you should only implement it if you know where to get the coffee, prepare it, taste it for quality, and the opportunities in the coffee market.
If you have authority in your chosen industry, you will have the confidence to venture into the industry. Your enthusiasm will also inspire your subordinates and other stakeholders in the organization to work more.
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The Differences of Small Business Vs. Entrepreneurship
Though small businesses and entrepreneurship share some similarities, they exhibit a wide gap between them in terms of their.
Small businesses are after perfecting regular business. They will stay in the market as long as they generate some profit, however, how little it is. Their primary objective is to generate profits and ensure their longevity in the market.
On the other hand, the objectives of entrepreneurial ventures are more diverse. They will always come up with new ideas and capitalize on them to generate more profit.
Additionally, entrepreneurs will always use their profits to expand their business or venture into other market sectors.
It is thus imperative to say that entrepreneurial ventures are more after innovation, revenue generation and diversification.
The small business owners believe in patience and discipline. They will be comfortable generating small but continuous profits than competing with other competitors in the market.
They will patiently wait for their investment to pick and shun away from any practice that may interfere with their businesses’ smooth running.
Conversely, entrepreneurs are highly motivated and influential. They will try to maximize their profits as much as possible.
For instance, they can analyze the market activity and develop the most viable strategies to gain a competitive advantage.
Additionally, they can train their employees on how to adapt to the changing market trends.
Small business employees are more inclined to execute their daily tasks than engage in revenue-generating activities like improving their products and improving overall efficiency.
On the other hand, the teams in the entrepreneurial venture are more specialized and experienced. As such, they constantly engage in optimizing their processes and finding more effective ways to achieve the company’s efficiency.
For instance, they may introduce new products in the market or improve the existing products to improve sales turnover.
The market share for small businesses is relatively small as they concentrate on people within their locality only. Their owners never think of capitalizing on potential customers from other regions. Instead, they focus on their needs and those of the community.
Unlike small businesses, entrepreneurial ventures are visionary. They aim at serving customers from all corners of the globe.
As such, they engage in marketing campaigns to increase their customer reach out. The relentless marketing efforts subsequently reward them a more significant share of the market.
Small businesses are not after growth. They are never in a hurry for anything. As such, they tend to operate in a more relaxed and comfortable environment without minding the other firms’ progress in the same industry.
On the flip side, entrepreneurial ventures operate in a fast-paced and competitive environment as they are after maximizing their profits and securing their competitive advantage. Their offices are designed well to encourage collaboration and team spirit.
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The Similarities of Small Business and Entrepreneurship
While small businesses and entrepreneurial ventures exhibit some differences, they also share the same pros and cons. Below are some of their similarities.
Quick Decision Making
Both small businesses and entrepreneurial ventures involve small teams whose members are almost on the same level. This makes the process simple as there are no hierarchies or bureaucracies involved, like major corporations.
Both small businesses and entrepreneurial ventures belong to one of few numbers of people. Additionally, both of them employ a small number of human capitals. This cuts down their production and operational cost hence resulting in substantial net profits.
Unlike in major corporations, the owners of small businesses and entrepreneurial ventures can meet with their customers and learn about their needs to address them.
This creates a personalized experience among the customers. In return, the customers become more loyal to the businesses.
Another way in which small businesses and entrepreneurial ventures win customer loyalty is by supporting community projects. Though some are not powerful enough to back huge projects, the little that they offer leaves their brands stuck deep in the customers’ minds.
High Levels Of Risk
Both small businesses and entrepreneurial ventures face a certain degree of risk when venturing into the market. These risks may include unpredictable market conditions, consumer behavior, the level of competition and so on.
You risk losing your capital if you don’t study the market conditions well and plan accordingly.
Both Ventures Are Tiresome To Operate
The two businesses are characterized by few or no employees. That implies that the business owners have to work for extra hours to make ends meet.
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Though small businesses are different from entrepreneurial ventures in most aspects, the main long-term objective for their existence is to generate revenue. That said, you should capitalize on all factors that can boost your profit maximization regardless of the kind of business you own. That may include improving your products, investing in marketing, creating your online presence, and so on. I hope, this gives you a clear idea of small business vs entrepreneurship.