What are the four things that differentiate Entrepreneurship from a small business?

At the CFE we often talk about building an entrepreneurial mindset.

The mindset is a set of skills which allow individuals to identify and make the most of opportunities, learn from their failures, and be successful no matter the challenges faced. Research shows that an entrepreneurial mindset is highly sought by future employers, can improve academic results, and is essential for creating new business ideas.

So once you’ve acquired this mindset, which can be learned at U-M through various ENTR courses offered by the CFE, what type of entrepreneurship best suits you?

To answer this, you must first understand the various types available and how they differ from one another.

Most often, the types of entrepreneurship are broken into four categories: 

• small business 
• scalable startups 
• large company or intrapreneurship 
• social entrepreneurship.

1. Small Business

The Small Business Administration (SBA) says that more than 99% of all U.S. businesses are considered small businesses, and a majority of them are entrepreneurial ventures. These could be anything from a restaurant to a retail store to a service provider that is local. They typically don’t have any intention of becoming a chain or franchise. These are the pizza places, dry cleaners, daycares, and self-employed individuals. Most small business entrepreneurs use their own money to get things started and only make money if they are successful in their venture.

2. Scalable Startups

A scalable startup attempts to grow quickly and become a profitable company. While less common than small businesses, these startups have a tendency to gain a lot of attention when they become successful. They typically start in an attic, a garage, a dorm room, or study room on campus, as an idea that’s being tossed around. These small scale concepts end up gaining investors which allow them to grow and scale up. This is what most folks think of when they hear “startup” or “entrepreneur” and get visions of Silicon Valley tech companies.

3. Intrapreneurship

Think of a company like Alphabet (Google) which owns several other companies, but has also started a few of their own. There are times when entrepreneurs work within a larger company as an employee, but see potential to spin off new products or services that take on a life of their own. These intrapreneurs utilize an entrepreneurial mindset to employ the resources their current employer has available to them. Thinking outside the box, they continue to solve potential problems for current and future customers. This model allows entrepreneurs the opportunity to hit the ground running thanks to support from a larger backer.

4. Social Entrepreneurship

Human created issues sometimes call for innovative community-based solutions. Social entrepreneurs seek to create a positive change with their actions. By launching an initiative or non-profit organization, whose primary purpose is to help people and not make money, these individuals strive to be the change they want to see in the world. Some topics these organizations focus on include racial justice, environmental conservation, or serving underserved communities in one way or another.

So no matter what type of entrepreneurship you feel is right for you, the CFE is here to help. Check out our courses, as well as our experiential learning opportunities. The University of Michigan has a sprawling ecosystem of entrepreneurship available to students, faculty, and staff. Visit entrepreneurship.umich.edu to find events, funding, networking, and other entrepreneurial programming. 

The terms "entrepreneur" and "small business manager" are sometimes used interchangeably, but an entrepreneur plays a different role than a small business manager. Not all entrepreneurs make great managers, and not all managers are cut out to be entrepreneurs.

Entrepreneurs Start Companies, Managers Run Them

As an entrepreneur, you are the dynamic force behind the planning and launching of new business enterprises. You may be involved in all aspects of your company throughout its life span, beginning with the raw startup stage, when the venture is little more than an idea. You handle issues ranging from the company's product design to determining the most efficient production methods and even finding the company's first customers.

In contrast, a small-business manager is someone you hire to handle the day-to-day management of your startup. The manager’s goal is to keep your company growing and operating efficiently. In some cases, you may bring in a skilled small-business manager to build your company into a larger entity. This typically happens after you realize that your creative vision only take your company so far, and having an experienced manager on board to direct day-to-day operations will allow the business to continue to grow.

Risks of Operating a Small Business

Owning a business requires a recognition and acceptance that your company could fail. Failure could mean a loss of all the money you have put into the company, a loss of the time you devoted to creating the business, as well as the personal disappointment that comes from business failure.

Small business managers face the risk of failure as well, but once the company has achieved certain milestones, the chances of failure are reduced. Small business managers must deal with the pressure of continuing to build the company in the face of ever-increasing competition.

Differing Skill Sets

Entrepreneurs that are most successful usually possess an unusual vision, the ability to identify what products and services customers will want or need in the future, and designing products or services to meet those needs. Small business managers who operate established companies do not necessarily need this predictive ability. For example, someone who operates a restaurant franchise needs to be focused on operational efficiency – controlling food and labor cost and maximizing customer satisfaction.

Many entrepreneurs manage the big picture such as creating strategies rather than overseeing the completion of the smaller tactics and tasks that must be done to implement the strategies. Small business managers are adept at administration – making sure all of these tasks are completed on schedule and within budget.

Creating a Working Environment

For your business to be successful, you must integrate your personality, values, and work ethic into every aspect of your company. If you’re at the office 20 hours a day, your team members will have to commit to long hours as well. An entrepreneurial environment is characterized by high energy, lots of ideas flowing and a sense of excitement about the company's future success.

A small-business manager seeks to create the most efficient, well-organized work environment possible. A good manager is an effective communicator and motivator – inspiring employees to put forth maximum effort. Seeing bottom-line profit grow through the years motivates managers. Their jobs can best be described as a slow, steady climb to success.

What is the difference between entrepreneurship and small business?

What are the 4 types of entrepreneurship business?

What are the 4 characteristics of a small business?

How will you differentiate the 4 types of entrepreneur?