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Differences Between a Small Business Owner and an Entrepreneur

Small businesses employ just over half of private sector employees and over the last 15 years have generated 64 percent of the new jobs according to the Office of Advocacy of the Small Business Administration. A small business is defined by the Small Business Administration has having less than 500 employees, although there are exceptions depending on the industry. While a business owner or manager has some things in common with an entrepreneur, there are some major differences.

Businesses are started for various reasons. The goal may be to earn extra income or replace the income from a nine-to-five job. The business may be started because the person is bored after retirement or has been advised by his accountant to start a business for tax purposes. Entrepreneurs set out to establish companies that have upside growth potential. The company is based on the entrepreneur’s belief and energy that the company will succeed no matter the risks. The entrepreneur envisions a multi-million dollar company while the small business person manager/owner sees the business as providing a comfortable lifestyle.

Small businesses are often self-funded. The owner uses her savings or credit cards for the initial funding until the business supports itself. The business expands as it generates additional cash. Entrepreneurs often need funding beyond what she and her friends and family can provide. Private investors, sometimes called accredited or angel investors, are brought in for initial rounds of financing based on the company’s business plan and management team. Venture capital investment may be sought when the company is more established and requires several million dollars in capital.

Business Planning
Because of the need for investors, entrepreneurs prepare a business plan to use as a marketing tool to attract capital. The plan outlines the business model, product, competitive advantages, market, marketing strategies and financial projections. A business manager plans for the future, but often don’t go through the formal process of preparing a full blown business plan.

Entrepreneurs are not risk aversive and have a positive attitude that their company will succeed. And that’s important because most companies fold within the first five years of business. Entrepreneurs believe in their success and work for it, often at the detriment of their personal lives. Business management works to make their business be successful so it generates enough income to support the business, its employees and owner. Since any decrease in income affects the lifestyle of the manager/owner, the tendency is to avoid risk.

Name of author

Name: Dee Power