Small Business Vs Startups

May 20, 2013

I have been reading about startups a lot. And I like startups. There are some really cool companies that rise from them.

What bothers me is that the term startup is used incorrectly 80% of the time. The other 20% of the time, the word is used correctly, but most people confuse it’s meaning.

The ones that confuse the word tend to think startup means business. It does not. It can’t. The majority of them don’t even make money.

Think of the word business for a minute. Better yet, think of the phrase “Going into business”. I don’t know about you, but to me that means “Go make money for myself”.

How about this one “I’m in the software business”. What does this one say to you? To me it says “I sell software”. I may build it and sell it, or I may just sell the software straight up. The key is I render goods and services for money.

Businesses Make Money

At the end of day, that is all there is. A business makes money. Sometimes it’s a profit, and sometimes it’s not. But if it’s not, the business won’t be around long.

So how does a business make money? It’s simple; they need to have something that someone wants and will give them money for. In order for someone to hand over money, it has to solve a problem. A real problem. Not something that you think some person may like, and you sure can’t just give it away.

The second thing that defines a business is growth. I know not every business wants to be huge, but they have to grow some. All businesses start out small and in order to stay in business, they have to grow, even just a little. That’s the growth I am talking about. There has to be a target, even if that target moves from time to time.

Startups: Looking for Cash

The problem that I have with startups and how some people view them is that they don’t have any money, and they aren’t making any. I want to puke every time I hear the term startup mode. What a complete crock. There is no startup mode. Better yet, startup mode is a made up term to get people to work harder for less.

The ones pushing people in startup mode have no idea if what they are doing is going to work, but they expect those people to work their asses off to find out for them. These are not businesses, they are simply expensive experiments.

Getting Acquired

This is the worst. There are a few winners here. Here are some of the people that are not the winners: the ones busting their asses in startup mode, and the customers. These are the two most important segments, and the one’s thrown into the fire when some startup guy finally figures out how to make money. By selling the whole thing and getting rich. This is a major issue.

A real business is not going to jeopardize their customers. That’s their money. Their most valuable asset. They have worked hard to gain trust and they will do anything they can to keep their customers. Think about how many times Google has denied the Government’s request for their customers information. That is what a business does.

Lost Trust

When an acquisition happens, the startup gets swallowed up by a business and with it goes a lot of trust. The early customers that thought the business would eventually make money and live on for years have been used as leverage and some dude is laughing all the way to the bank.

More than likely this was the plan all along. Actually, some people in the startup community preach this. Build something, get purchased, and bask in the glory of your money pit.

For some startups, it’s all about getting rich as fast they can by selling what they were able to either create or talk other people into creating.