In the U.S., approximately 99.7 percent of firms are businesses with fewer than 500 employees. These businesses represent 49.2 percent of private sector employers and account for 64 percent of net new jobs created from 1993 to 2011. Many people think that every small business is alike. However, startups are as different as they are the same. This means that small business startup consulting professionals must provide a special type of assistance.
A startup is a temporary organization that works to develop a profitable, repeatable, and scalable business model. Since there are no customers and very little knowledge of whom those customers will eventually be, the initial business model is based on guesses and ideas. Startups are designed to grow quickly and today, many businesses falling into this classification are technology-oriented and attempt to create a new market or shake up an existing one.
According to research recently conducted by the Ewing Marion Kauffman Foundation, companies driven by innovation take very different paths from traditional startups such as mom-and-pop stores. Entrepreneurial experts note that each type of venture faces different funding requirements. In addition, each has a different level of risk and different potential for growth.
A diverse group that includes external investors typically owns a company focused on innovative technologies. Traditional small businesses are usually funded and owned by family members. While a traditional small business is not dependent on innovations, a technology enterprise often is. Innovative startups are not usually profitable during their initial few years and they face higher risks, making it more important for their owners to seek expert advice from a startup consultant or mentor.
In spite of (or perhaps because of) those risks, startups driven by innovation play a larger role in encouraging economic activity particularly in the area of creating jobs. Both types of companies are essential for a successful economy but innovation-driven enterprises are even more so due to their potential to develop innovations and contribute jobs. Experts say that governmental strategies and policies should be designed with both types of ventures in mind.
Entrepreneurship should not be a catchall term because though their economic activity may be similar, each type of startup is different. Small business startup consulting professionals tailor their advice and support based on the type of startup that each client represents. They help prospective business owners assess the growth potential of their ventures and the risk involved. Consultants even provide insight regarding funding requirements and hiring challenges.