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FAQs about Startups and Small Businesses

How is a startup different from a large corporation?
While a startup exists to serve a larger market like a large corporation does, there are several differences between the two. Startups are new in their development, while large companies tend to be more established. Productivity and profitability are the usual goals for a large company, whereas a startup is focused on growth and a specific end goal (such as a buyout or IPO). You will also find large companies rely heavily on a hierarchical system with the staff but startups are able to adjust staffing needs as the company grows and evolves.
Is a startup better than a small business?
A startup is not necessarily better than a small business, or vice versa. From an entrepreneurship or investor perspective, you may prefer one over the other depending on your business goals, growth trajectory, access to funding, and other critical factors that make a small business operate differently than a startup.
Which has more profit potential, a startup or a small business?
There is profit potential for both a startup and a small business, but are limitations in place for a small business. The SBA has revenue limitations (that vary depending on the industry), which could impact the profit dollars a small business earns. However, a startup does not have any of these constraints, and may reach profitability much faster than a small business. Typically, a small business is focused on profit in the long-term, while a startup is focused on aggressive growth and market disruption, which may not mean it’s profitable in the short-term.

Conclusion

Although the two words may seem closely related, a startup vs. small business are two entirely different scenarios. It’s important to understand how distinctive each one is, so you know as an entrepreneur which one is the right choice for you. Choose the best fit for your personality and financial situation so you can set your business goals accordingly.

About the Author

Sara Coleman

Sara Coleman

Freelance Financial Writer

Sara Coleman is a freelance writer with several years of experience covering personal finance topics such as insurance, loans, credit cards, budgeting and more. Sara's work has been published across numerous financial sites. She is also a published children's book author.

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