What Is the Difference between Startup and Small Business?

I was writing an article on Ways to Secure Financing for Small Businesses and Startups then a question passed my mind, do my readers know the difference between a startup and a small business?

After some research on my immediate family and friends, I realized that many perceive the two terms to mean the same thing.

However, the truth is that there is a big difference between a start up and a small business.

You see, let’s assume I want to start an innovation, I will use the case of MPESA; a mobile banking service. When Nyagaka Anyona Ouko, the JKUAT student who invented MPESA was pitching the idea to Safaricom then CEO Michael Joseph, that was a startup. Often, startups involves growing a small business into a multimillion company by looking for means to scale it fast. 

On the other hand, when someone decides to start a nail parlour, this venture will fall under a small business.

Now that we have understood the operational difference between a startup and a small business, here is the definition.

Startup Definition: A startup is a newly established company whose objective is creating and bringing a unique product or service to the market.

Small Business Definition: a small business is a privately owned company that operates on a smaller scale by service a local or specific market.

The main difference between a startup and a small business is that a startup often deals with innovation and its growth is usually rapid. Its aimed at scaling very fast by involving different financing options that will see it expand quickly and meet a large market need. On the other hand, a small business tends to have a steady and manageable growth through a predictable model. 

If you are still struggling to understand what is a startup i will advice you watch some financial films such as Startup to get a clear picture of how this model of business is created.