Small Business or Entrepreneurial Business

            Is that corner deli a small business or an entrepreneurial project? That depends on what is unique about the deli.  Isn’t that question silly since small business owners and entrepreneurs are the same thing?  Absolutely not.  There is a world of difference between small business and entrepreneurship; however, you will see how it is easy to confuse the two and why you should care about the difference.

            You probably see small businesses constantly throughout the day.  From the dry cleaner you dropped that suit off with to the diner you had lunch.  And you might have been to a couple of entrepreneurial ventures as well, from that new gym that opened up to that ice cream place to seem to be seeing everywhere now.  What makes the two different?  It mostly has to do with creativity and growth.

            Small business is easy to define.  Small businesses tend to keep small, provide a modest salary for a few people, and fill only a small need in a given area.  A good example is a local pizza shop.  Your neighborhood pizza shop probably provides for the owner’s living expenses, as well as one or two employees depending on the size of the shop, and only serves pizza to about a 30 minute radius around the shop.  The shop owner probably wants the restaurant to become bigger and more profitable but the owner probably isn’t too concerned about branching out or becoming the biggest household name in pizza.

            That small pizza shop might have better pizza than another shop, but they probably don’t have anything unique.  If you want a slice of pizza, a sandwich, or some pasta, chances are you can find them in twenty different shops in your area.  That pizza shop isn’t bringing anything new to the table; it simply is selling the food you already know at either a better price or better quality than the other guy.

            Have you figured out the difference between small businesses and entrepreneurial ventures yet?  Let me explain what makes an entrepreneurial venture using the same example as before, a pizza shop. 

            Our entrepreneurial pizza shop might be the same size as the other pizza shops in the area, having only one or two owners and a handful of employees.  However, it might have more stake holders than the small business shop.  If your look pizza stop makes more money this year, its owner will have more money to bring home.  However, if our entrepreneurial shop makes more money it will probably either have to pay some money to its investors, or what we call silent partners.  Silent partners are people who invest money in the business, but don’t actually work at the business.  I can pretty much guarantee that most small businesses in your area don’t have any silent partners and the only people worried about business growth is the business owner or the bank waiting for loan payments.

            If the entrepreneurial pizza shop has silent partners or not, chances are the majority of the money made by the shop is going to be poured back into the business’ growth account.  In fact, where a small business owner will take the extra money made home with them, the average entrepreneurial business owner will have a small living expense salary or will not make any money from the business at all.  This is because the entrepreneur is more concerned about business growth and the long term pay off while the small businessperson is more concerned about his or her own needs and short term pay offs than future growth.  Investing all of this money back into the business means our little entrepreneurial business shop is going to start growing very quickly.  The entrepreneur will use all this growth money by either opening up new locations to serve a greater area or by spending that money on new ways to make their store unique.

            I said before that the two main differences between a small business and an entrepreneurial business is growth and creativity.  This means that either the entrepreneur is going to take the money made that has been reinvested into the company to open new locations for the business, or he or she is going to make that business more unique.  Opening new locations is doing just that.  Taking the first pizza shop and opening a clone of it in a new area to serve a new market.  However, there are many ways to make a store more unique, so let me explain a little bit about what I mean.

            When you walk into your typical pizza shop what do you expect?  Well you expect them to have a location, a product, and a way to pay.   That is what we call the core of the business.  Right off the bat you know that the pizza shop will sell pizza, will have a cash register to make change, and they will have a location to sit down or pick up the pizza from.

            After the core of the business you have what we call the expected part of the business.  This section is made up of things entrepreneurs have done that were so successful that everyone is expected to do this.  When you walk into your local pizza shop you now probably expect them to accept credit cards, you expect them to sell sandwiches, cheese steaks, pasta, and sides like French fries or Buffalo wings.  You also expect to see a place to sit down and eat, a phone number for you to call your order in ahead of time, and some sort of service where they will deliver it to your house.  These are things that were at one time unheard of but are now common in all small pizza shops.

            It is at this third part of the business that separates small businesses from entrepreneurial ones.  This part we call augmented.  This part is made up of things so unique to the business that it makes you want to go to them.  This part will become so popular that eventually it will become expected and you will see them in all pizza shops.  One example of something that was recently augmented but is now becoming more expected is online ordering for pizza.  Other examples of augmented things for a pizza shop might be delivering your pizza with a choice of movie rental.  Or having a van that can cook your pizza exactly to order and deliver it to you as fresh as possible.  These are typical things that your average small business owner might be afraid of or doesn’t dare think of any way to make them happen.  This is one of the biggest differences between an entrepreneur and a small business owner.  A small business owner plays it safe and does what works while an entrepreneur takes huge risks and tries to change the game.

            Now hopefully you see the difference.  Next time when you go to get pizza, try asking your kids if that shop is a small business or an entrepreneurial business.  Some key things to look for are how many locations does the pizza shop have and/or what that pizza shop does that no other pizza shop has done before.  After that, challenge your kids to think about what they would like to see that business do and if the owned the business what could they do differently.  No idea is too big, challenge your kids to think big and they might become an entrepreneur too.

              I said before that the two main differences between a small business and an entrepreneurial business is growth and creativity.  This means that either the entrepreneur is going to take the money made that has been reinvested into the company to open new locations for the business, or he or she is going to make that business more unique.  Opening new locations is doing just that.  Taking the first pizza shop and opening a clone of it in a new area to serve a new market.  However, there are many ways to make a store more unique, so let me explain a little bit about what I mean.

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