Entrepreneurship vs small business
Often, the terms small business and entrepreneurship are used by individuals
interchangeably when referring to a business that is seeking to accomplish
specified goals with very few resources. Though this is true, this is probably the only
similarity between the two. In the start, most entrepreneurial ventures are small
businesses; however, all small businesses are not entrepreneurship.
Entrepreneurship essentially involves coming up with an idea, formulating a business
around it, and managing the business, while also assuming its risk. An entrepreneurial
venture typically starts as a small business and then grows. In contrast, a small business
is a business that a person or a small group of individuals own or manage. The owner
has a direct impact on the decision making process. There are very few employees in a
small business and its market share is also quite less.
In this article, the different features of small businesses and entrepreneurship will be
discussed and the key differences between the two will be presented.
Definitions and explanations
Entrepreneurship
Entrepreneurship refers to the process in which a business opportunity is identified by
an individual, who uses this idea to formulate a business. It represents the ability and
readiness of an individual to develop and look after a business and manage its risks so as
to achieve profits in the long run. A person who shows willingness to take up such risks
is called an entrepreneur. Entrepreneurship is a challenging field because it is not
guaranteed that the business will achieve success. Nonetheless, majority of the
entrepreneurs are risk takers and are very enthusiastic about their ventures.
Entrepreneurs comprehend that when the risk is higher, the returns will also be higher.
There are a few qualities that are common to successful entrepreneurs: they are able to
develop a competitive advantage, bring together a team that is highly competent and
skilled, exhibit high technological expertise, are hardworking and loyal, have a high risk
taking ability and perform effective money management.
An entrepreneurial venture starts operating as a small business. However, it is likely to
exhibit rapid growth because the entrepreneurs are in the constant lookout out for
opportunities to take higher risks and hence, advance their business. They are not
worried about making high profits; rather, their objective is to use creative methods
while carrying out their business and to sell innovative products or services.
Small business
Small business is owned and managed by a single person or a small group of people.
The capital is contributed by these few individuals, who are involved to a large extent in
the decision-making process. There are a limited number of employees in a small
business, hence it is quite easy and convenient to manage. The scope of operation of this
kind of business is quite small and they have a small share in the market.
The key objective of a small business is to generate profits. However, as the owners are
not keen on evaluating and taking up new business opportunities, they have
limited profit making ability. The most popular kinds of small businesses are sole
proprietors and partnerships.
Difference between entrepreneurship and small business
The main points of difference between entrepreneurship and small business has been
detailed below:
1. Meaning
Entrepreneurship is the process of identifying a new business opportunity in the market
and starting and developing a new business. It typically commences operations as a
small business and achieves growth subsequently. A small business is one that is owned
and controlled by an individual or a small group of people and has a limited scope and
market share.
2. Objective
The main objective of entrepreneurship is to develop a new and innovative product or
service. Entrepreneurs usually start a business because of their passion towards it. This
is why they will continue carrying out their business without thinking about the risks
they face or the profits they are making. The key objective of small businesses, however,
is to generate profits. Hence, when they come across situations when they face excessive
risks, they often suspend their business to prevent losses.
3. Business expansion
Entrepreneurship achieves rapid growth and development because entrepreneurs are
always seeking new opportunities. They are always looking for change and are never
content with their current situation. On the other hand, there is limited scope of
development in small businesses. This is because small business owners do not seek new
business opportunities and are satisfied with whatever success they achieve.
4. Attitude of owners
Entrepreneurs and small business owners are both self-employed; however, they exhibit
different attitudes. Small business owners are satisfied with whatever success they
achieve and do not try to change much. On the other hand, entrepreneurs are always
seeking to change and develop. They exhibit an energetic attitude, instead of being
comfortable with their existing situation.
5. Innovation
Entrepreneurs are famous for their willingness to innovate and create new things. On
the other hand, small businesses owners usually do something that is already being
done by entrepreneurs.
6. Market share
The vision of entrepreneurs is quite often to influence and affect the entire world.
Hence, their business usually has an impact on a large number of people, and their
market share is usually quite high. On the other hand, small businesses have a smaller
share of the market because they provide service to a small number of people.
ENTREPRENEURSHIP VS SMALL BUSINESS
Meanings
Recognizing and exploiting a new business opportunity A business that is owned and controlled by an
in the market individual or a few individuals
Objectives
Creating and developing a new and innovative product Making profits
or service
Business expansion
Experience rapid growth and development Do not experience growth
Attitude of owners
Have an energetic attitude and are always looking to Are satisfied with their situation and do not wish to
change and develop change or experience growth
Innovation
Exhibit high degree of innovation Are not innovative; carry out a business that has already
been established by an entrepreneur
Market share
Have a high share in the market Have a low market share
Advantages of Small-Business Ownership
Independence. Entrepreneurs are their own bosses. They make the decisions. They
choose whom to do business with and what work they will do. They decide what hours to
work, as well as what to pay and whether to take vacations. For many entrepreneurs the
freedom to control their destiny is enough to outweigh the potential risks.
Financial gain. Entrepreneurship offers a greater possibility of achieving significant
financial rewards than working for someone else. Owning your own business removes the
income restraint that exists in being someone else’s employee. Many entrepreneurs are
inspired by the mega-millionaire entrepreneurs we see today, such as Steve Jobs, Elon
Musk, Jeff Bezos, and Mark Zuckerberg.
Control. It enables one to be involved in the total operation of the business, from concept
to design to creation, from sales to business operations to customer response. This ability
to be totally immersed in the business is very satisfying to entrepreneurs who are driven by
passion and creativity and possess a “vision” of what they aim to achieve. This level of
involvement allows the business owner to truly create something of their own.
Prestige. It offers the status of being the person in charge. Some entrepreneurs are
attracted to the idea of being the boss. In addition, though, there is the prestige and pride of
ownership. When someone asks, “Who did this?” the entrepreneur can answer, “I did.”
Equity. It gives an individual the opportunity to build equity, which can be kept, sold, or
passed on to the next generation. It’s not uncommon for entrepreneurs to own multiple
businesses throughout their life. They establish a company, run it for a while, and later sell
it to someone else. The income from this sale can then be used to finance the next venture.
If they’re not interested in selling the business, the goal may be to build something that can
be passed down to their children to help ensure their financial future. One thing is sure: In
order to fully reap the financial benefits of a business venture, you need to be the owner.
Opportunity. Entrepreneurship creates an opportunity for a person to make a
contribution. Most new entrepreneurs help the local economy. A few—through their
innovations—contribute to society as a whole.
Disadvantages of Small-Business Ownership
Time commitment. When someone opens a small business, it’s likely, at least in the beginning,
that they will have few employees. This leaves all of the duties and responsibilities to the owner.
Small-business owners report working more than eighty hours a week handling everything from
purchasing to banking to advertising. This time commitment can place a strain on family and
friends and add to the stress of launching a new business venture.
Risk. Even if the business has been structured to minimize the risk and liability to the owner,
risk can’t be completely eliminated. For instance, if an individual leaves a secure job to follow an
entrepreneurial dream and the business fails, this financial setback can be hard to overcome.
Beyond financial risk, entrepreneurs need to consider the risk from product liability, employee
disagreements, and regulatory requirements
Uncertainty. Even though the business may be successful at the start, external factors such as
downturns in the economy, new competitors entering the marketplace, or shifts in consumer
demand may stall the businesses growth. Even entrepreneurs who go through a comprehensive
planning process will never be able to anticipate all of the potential changes in the business
environment.
Financial commitment. Even the smallest of business ventures requires a certain amount of
capital to start. For many people starting small businesses, their initial source of funding is
personal savings, investments, or retirement funds. Committing these types of funds to a business
venture makes them unavailable for personal or family needs. In most cases where a small
business receives start-up funding through a loan, the entrepreneur must secure the loan by
pledging personal assets, such as a home. Risking the equity in one’s home is a financial
commitment not all entrepreneurs are willing to make.
Sole Proprietorships
Partnerships
Corporations
Other Types of Ownership
