Small Business v. Startups: Differences?

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As we begin the New Year, I was thinking about an article that appeared sometime last year in the Wall Street Journal,  how we and our Government define “small business”….and what is the difference between a small business and a startup, anyway.  We generally ascribe most of the employment growth in America to the “small business” sector.

The U.S. Small Business Administration targets its valuable loan program to small businesses, those businesses which will probably remain small.  Generally, if your busines has less than 500 employees, and less than $7 million in revenues, the business is deemed a small business.

And yet, even though we ascribe job growth to the small business sector,  it is estimated that less than a quarter of America’s 27 million small businesses have employees.  Most of the statistics that report net job creation in the ranks of small business actually are taking into account those startups that became emerging growth companies and eventually mature companies.

Startups, and many young growth companies, do not qualify for a Small Business Administration loan.  To me, a startup  refers to a young company, five years old or less, which is in the innovation economy and has potential for explosive growth.  In other words, that small young company which one day may have a billion dollar revenue is today a “startup”, and not a small business.

A Brookings Institute paper published in May 2011 reported that 75% of small-business owners aren’t looking to grow big.

So, I will continue to refer to “startups” in terms of young companies which are in the innovation sector and which are actually emerging growth companies, and/or small but growing businesses….to distinguish them from “small businesses.”  I will also use the term “new ventures” interchangeably with “startups.”





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