Entrepreneurship is a term with many definitions because different experts have various views on what it means. Some say that entrepreneurship is when people start and run their own business. However, some experts disagree, arguing that it’s not possible for a person to work entirely independently, since businesses need growth and leadership to thrive.
Despite these differences, all definitions of entrepreneurship agree that it involves taking an idea, building a business around it, managing it, and accepting the risks involved.
A small business, on the other hand, is not so different from entrepreneurship. Experts define it as a business owned or managed by one person or a small group of people. In small businesses, the owners make the main decisions, the market share is relatively small, and there are typically fewer than 50 employees.
I am often asked, “What is the difference between small businesses and entrepreneurship?” So, let’s explore this topic in detail.
Key Takeaways on the Differences Between Small Businesses and Entrepreneurship
Definitions: Entrepreneurship involves creating and managing a business around an innovative idea and taking on its risks. A small business is usually owned or managed by a few people, has a smaller market share, and fewer employees.
Leadership: Entrepreneurs may not need advanced leadership skills at first, but small business managers often need effective team leadership.
Focus: Entrepreneurs generally focus on future growth and “big picture” goals, while small business managers handle daily operations.
Risk: Entrepreneurs accept inherent risks, while small business managers work to limit risks.
Knowledge: Entrepreneurs need skills to identify good opportunities, while business managers require detailed knowledge of the specific business.
Leadership Skills
Entrepreneurs, especially if they are sole proprietors, might not initially need strong leadership skills. However, developing effective leadership becomes important as the business grows or explores new ideas to ensure continued success. Small business managers are often responsible for overseeing operations and managing a team. An entrepreneur who also takes on a managerial role must ensure productivity and effectively lead the team. Investing in a leadership coach to train senior members can raise leadership standards across the company.
Focus
Entrepreneurs tend to focus on the “big picture” of their business, which may involve exploring new markets, building essential connections, and planning for future growth. Small business managers, in contrast, are often more focused on daily business operations, like managing customer relationships, ordering supplies, or overseeing production. Generally, entrepreneurship involves setting the vision and strategy, while management focuses on execution.
Risk
Entrepreneurship inherently involves a willingness to take risks. An entrepreneur may take on debt or invest life savings into a business, accepting the potential consequences if it fails. Small business management, however, often involves minimizing risks as they arise. Managers aim to reduce costs and maximize productivity, making risk-averse choices to support the stability of the business. While entrepreneurs often embrace risk, effective small business management requires a cautious approach to avoid unnecessary risks.
General Versus Specific Knowledge
Entrepreneurs may not need detailed knowledge about a specific business to succeed. They might be skilled at spotting opportunities and starting a business, but they may lack some management skills. In contrast, a small business manager typically needs in-depth knowledge of the business to operate it effectively. Depending on the business’s size and complexity, specific skills, like accounting or marketing, may be essential to manage operations smoothly.
Both small business owners and entrepreneurs are self-employed, and they have much in common. As we’ve seen, even some of the world’s biggest companies, like Apple, started as home-based businesses. Many entrepreneurs start from humble beginnings as small business owners and grow by staying ambitious and driven toward success.
