In my short time on this planet I’ve been lucky enough to meet some interesting entrepreneurs and small business owners. Their crafts vary from bottled cocktails to publishing to t-shirt printing and skincare. I’ve met the people that often fund entrepreneurs, from the angel, to venture, and private equity level.
These people all understand what the difference between a small business owner and an entrepreneur is, but few others seem to. Take this Huffington Post article which does its best to blur the lines:Fifteen percent of entrepreneurs launched their own ventures after losing their job, according to a new poll of nearly 1,400 small-business owners conducted by accounting software firm WaveAccounting.
This quote uses the two words interchangeably. And this is most often how we see it. But is someone who starts fixing computers as much of an entrepreneur as Mark Zuckerberg?
Not likely. They have different perspectives. They have different goals. A small business owner isn’t necessarily focused on driving substantial amounts of growth to his business. If the growth occurs then great, but it may not be the top priority. Just starting a business doesn’t make you an entrepreneur.
The distinguishing factor is how small business owner and entrepreneurs spend their time. Unless the small business owner is devoting more time to growing the company than maintaining it, they aren’t likely an entrepreneur. Here’s an example:
A small business owner has enough money to hire one new person to their team. The team is in need of new technicians to help serve the current customer demand. The owner hires a new technician. An entrepreneur is much more likely to hire another member of the sales team instead. They’ll deal with surging demand when the product or service starts to weaken.
This is because the focus of the entrepreneur is growth. And an entrepreneur isn’t likely to allow financial constraints to get in the way of their growth. While a small business owner is likely to own 100% of their own company, the entrepreneur will sell off pieces of theirs over time to raise enough money to fund the growth.
Small business owners may fund growth through a bank loan, or just increased earnings. But they are much less likely to offer up chunks of the company to get the capital needed to grow substantially. And investors aren’t likely interested in a small company that isn’t focused on growth.
As the Huffington Post said, the recession has forced some unemployed folks to strike out on their own. But that doesn’t make them entrepreneurs.
While it didn’t start due to unemployment, Weakonomics is a small business wholly owned by its author. Does it make lots of money? No. Is my focus on increasing the amount of income it makes? No. Did I bring in outside investors to help fund the growth? No. My focus on Weakonomics is more of as a going concern. I’m happy with where it is now and while growth would be nice, I’m not chasing it. I am a (very) small business owner.
Now, if I wanted to turn Weakonomics into a media empire, we’re talking entrepreneurship. By now Weakonomics could be a network of blogs, do video interviews of economists, have a podcast, employ an ad sales team, and offer premium content behind a paywall IF that had been my goal and IF I had been successful. But to grow that quickly my focus can’t be on what is happening today, but on what I want to happen tomorrow. Likewise, this growth wouldn’t be possible without getting some investors, you just can’t get that big in 4 years by reinvesting profits.
Is it a bad thing to confuse small business owner with entrepreneur? It’s not the end of the world. But some small business owners will call themselves entrepreneurs because it sounds cooler, or somehow garners more credibility. And most non-business owners will confuse the terms because the media struggles with the same distinction. But they are two words with two different meanings and we shouldn’t blur them.
Image: World Economic Forum