Recently I was talking with a friend that had been a small business owner for eight years before shutting down his company to join a tech startup. It’s been over a year since he entered the tech startup world and he said he’s been knocked down making all the common mistakes like taking too much time building features no one needs, not generating enough traction for the product to be viable, and poor timing.
One of the things he said really stuck with me: being a small business owner for many years and joining a tech startup are very different. Here are three ways he said they differ:
- As a small business owner, you focus on profitability from day one. Many tech startups are bought for large sums of money without ever turning a profit.
- As a small business owner, it’s easy to keep track of how much a good or service costs and you make money by marking it up some amount and selling it. Tech startups often have no marginal cost for each additional user/customer, creating a very different dynamic.
- As a small business owner, marketing typically comes through word of mouth and they service a local geographic area. Tech startups need to build a repeatable customer acquisition process and deliver the technology on a national or international scale.
The biggest aha moment for him was that tech startups aren’t about making money in the short term and that it’s usually more about building a large customer base before economies of scale and profitability kick in. Small businesses and tech startups are alike in that it all comes down to people and very different in how the economics work.
What else? What are some other ways small businesses and tech startups are very different?
David Cummings on Startups 
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