By Manon Bullock
When I recently posted a Facebook status asking if anyone knew of any minorities with a successful startup, there was no surprise I quickly received responses from small business owners who definitively had considered their enterprises synonymous with that of the former.
Although it is common for most to use these two terms interchangeably, they have fundamental differences in both the ideology and the business model. According to Silicon Valley entrepreneur Steve Bank, a start-up is a “temporary organization designed to search for a repeatable and scalable business model.”
Most startups begin with an innovative idea and intend to rapidly take over the current market or create a new one. If a start-up is successful, it is likely to become a large company or corporation and receive additional funding from angel investors, venture capitalists, or through an IPO (Initial Public Offering).
Once this happens, a challenge for the founder of a startup is that he or she will begin to relinquish pieces of his or her company to shareholders and no longer has the same control as in the beginning stages. In contrast, according to the United States Small Business Administration, small businesses are “independently owned and operated and not dominant in its field.”
Small businesses are driven by profitability and stable long-term value and a desire to secure a place within the local market. Many entrepreneurs, who begin small businesses, fund their own ventures, rely on financial support from family and friends, or secure bank loans for continued funding since profitability may occur on a slower timeline. Dwight Clinton, CEO and founder of Clinton Investigations, a private investigative firm specializing in providing services for the legal and insurance industries, describes his experience as a small business owner.
“Owning your own business affords great freedom and license to create an entity based on a personal vision,” he states. Having a background as both a police officer and detective with an entire career spent in investigative work, he was able to hone knowledge and entrepreneurial leadership skills from previous work opportunities. Clinton describes working longer hours than when he was employed in corporate America and the daily pressure of being responsible for the financial well being of his employees and their families as some of the challenges to being a small business owner.
Another challenge, he states, is that “positive cash-flow is not automatic. You have to make it happen through diligence in everything you do, day in and day out.” Carolyn Mosby, president and CEO of Mid-States Minority Supplier Development Council, whose primary mission is to promote and cultivate successful minority enterprises in several Midwest business communities adds, “People go into business everyday, but all are not and will not be sustainable.”
Fundamentally, a start-up can be seen as a way to test a model to become sustainable on a large scale, while a small business wishes to become sustainable on a small scale. “Having a sound business plan, researching your potential client base, and understanding what opportunities are out there to carve out a niche are very important,” she said.