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The Difference Between a Small Business Owner and an Entrepreneur

02/28/2014 06:13 EST | Updated 04/30/2014 05:59 EDT

With start-ups being the latest hot "industry", everyone from programmers to MBA graduates are attempting to form their own start-up and become the next Google or Whatsapp. While the new economy is gradually moving individuals away from large, process-oriented multinational corporations and towards fast, nimble start-ups, significant questions are starting to arise concerning what truly makes a successful entrepreneur.

There have been numerous discussions concerning what makes a true entrepreneur from a behavioural perspective. The fact that entrepreneurs need to be stubborn and persistent to their extroverted natures means that they definitely have a unique personality enabling them to build successful and profitable corporations. While the personality traits of entrepreneurs have been fully vetted, a number of start-up employees and venture capitalists are starting to wonder which actions differentiate an entrepreneur from a small business owner.

Differentiating between an entrepreneur and a small business owner can be a tricky proposition. On the surface, both the entrepreneur and the small business owner exude the same characteristics, particularly when growing the business initially. Focused on building their businesses, making personal sacrifices and working long hours are typical behaviours of start-up founders. Although the behaviours are typical, the differences increase and become more critical as the business or start-up grows and increasingly differentiates the entrepreneur from the small business owner.

While there is nothing wrong with being a small business owner, most individuals looking to enter the start-up environment are looking for the true entrepreneurial experience rather than a small business one. If the psychological characteristics of an entrepreneur and a small business owner are the same, how can individuals and investors differentiate between the two? There are number of telltale characteristics, including:

(1) Failure to Delegate: Building a business is not a one man show. It means building a team. When accelerators or incubators look at applications, they look for teams not individuals. Unfortunately, while incubators and accelerators take a cursory look at the teams, the failure to look deeper into a business team is a significant issue for growth. When one is looking at the business team one needs to determine whether or not it is truly built as a team of equals. As the business grows, no one individual can handle all the tasks required to grow and sustain the business.

(2) Treating Co-Founders as Subordinates Instead of Equals: Usually, start-up founders with the strongest and extroverted personalities are the face of the company. This can be seen with the partnerships between Bill Gates and Paul Allen or Steve Jobs and Steve Wozniak. While Bill Gates and Steve Jobs were the face of the company, it didn't mean that the contributions of Paul Allen or Steve Wozniak were insignificant. They were in fact invaluable members of the start-up team whose contributions were invaluable to their successes. Those successes were based on respecting contributions from the entire team, not the publicly facing founder. Too many publicly facing start-up founders forget that it is the team that will build the start-up to a successful corporation, not just the front man.

(3) Not Wanting to Grow to the Next Level: Start-ups in the early stages of their growth go through miniature growth spurts, particularly when it comes to user and revenue growth. User and revenue growth usually comes in phases that require modifications in both start-up founder behavior and organizational processes. Unfortunately, founders with a small business attitude are less likely to take the risks necessary to successfully grow business to the next level. In many respects, small business owners value stability over growth and fail to realize that continual growth means continual risk. Whether it is the start-up founder being comfortable with the current stage of the business, or an increasing unwillingness to take risk, a significant number of start-up founders "stall" in their quest to grow their start-up to become the next Apple or Google.

(4) Not Bringing In Outside Investors / Advisors: While it is crucial that start-up founders and investors and advisors are aligned, it is also critical that those investors and advisors bring an objective perspective and are not only "friends" of the founders. Merely bringing in "friends" prevents the start-up from getting the right expertise to grow.

(5) Not Considering the Exit Strategy: While building a start-up based purely on an exit strategy is incompetent, not at least considering it is equally incompetent. As any start-up founder will confess, building a start-up because you are passionate about the topic or industry is best way to succeed. However, just letting go is the best option for both the start-up and its founders. Successful founders know that their businesses are potentially one of many or at least a small part of their overall start-up journey. However, small business owners are focused on controlling the business over the long term rather than the short term. As such, the necessary steps required to grow a business are not done in as effective a manner as with a start-up with a planned exit.

Many may question why discuss the differences between an entrepreneur and a small business owner. The simple answer is to improve the odds for future start-up employees and investors to find the right start-up for them. Start-ups have enormous odds to beat to achieve the success of an Apple or Google. Start-up employees and investors need every tool available to differentiate between those looking to grow into tech success stories and those looking to become small businesses. In the end, it is not about belittling the small business owner or glorifying the entrepreneur, it is about ensuring that everyone has clear expectations of where the start-up is going and what value to derive from it both professionally and personally.

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