In 1982, at age 29, Howard Schultz was hired (after a year of trying) as head of marketing at Starbucks by founders Gerald Baldwin and Gordon Bowker.
Baldwin and Bowker had a nice thing going, and we’re happy with their lot.
On returning from a business trip to Italy, Shultz was inspired.
However, Baldwin and Bowker didn’t share his vision for turning their traditional business model/regional store into a national café chain via rapid store expansion.
Shultz left in 1985.
Returning in 1987, and with the backing of investors, bought them out for $3.8 million.
With the freedom to follow his vision, Starbucks now serves skinny latte’s in over 30,000 stores around the globe.
Shultz is an entrepreneur, Baldwin, and Bowker we’re businessmen.
Which are you, entrepreneur vs. small business owner?
You’re about to find out!
Are you a business owner or an entrepreneur?
We can partially answer that by asking another question.
Does owning a business mean you’re an entrepreneur?
According to a published study by Quarterly Journal of Economics, no:
Their findings revealed that the critical difference separating an entrepreneur and a business owner is their legal business structure – unincorporated or corporate.
Their study also found that unincorporated business owners ran companies reliant on manual talents. In contrast, incorporated business owners are more inclined to launch entrepreneurial ventures requiring cognitive skills.
I’m not so sure!
I guess they didn’t account for entrepreneurial coffee shops, freelance designers, and boutique fashion store owners!
But there’s some interesting psychology at play, I’ll explain next:
Incorporated or unincorporated – and why It matters!
Incorporated business owners enjoy liability protection, so if a risky investment doesn’t pay off, their private assets are as safe as houses, literally speaking. In comparison, unincorporated business owners are legally liable and could lose the roof over their heads!
The liability protection empowers the incorporated business owner, releasing their entrepreneurial spirit and encouraging the, let’s make it happen attitude.
They have a financial safety net should they slip!
You are what you think you are, right?
Because the study also found a far higher percentage of incorporated business owners described themselves as entrepreneurs than unincorporated.
But what about the sole proprietor and general partnerships yet to form an LLC or C/S corporation?
Aren’t you entrepreneurs in the making?
Possibly, just ensure you’ve got adequate insurance along the way.
Legal structure aside, what about how they run their business?
Let’s take a look:
The difference between an entrepreneur and business owner
Sue Birley – Author of Mastering Entrepreneurship and professor of entrepreneurship and director of the Entrepreneurship Center at The Management School, Imperial College of Science, described the difference between entrepreneurs and business owners as:
A SMALL BUSINESS OWNER:
“An individual who establishes and manages a business for the principal purpose of furthering personal goals. The business must be the primary source of income and will consume most of the owner’s time and interest. The owner perceives the business as an extension of their personality, intricately bound with family needs and desires.”
“An individual who establishes and manages a business for the principal purpose of profit and growth. The entrepreneur is characterized principally by innovative and creative behavior and will employ strategic management practices in the business”.
To understand the core differences between entrepreneur vs. business owner (which are you), we have to dig deeper and look at their daily tasks:
8 important differences between entrepreneurs and business owners
1. Small business owners don’t bet it all on red
Small businesses are usually the sole income source for their owners and those dependent on them. And naturally, anyone with an ounce of common sense isn’t going to risk everything they’ve worked for taking a risky bet.
They make calculated decisions, take measured risks, follow an established business model, or invest in a proven franchise, growing their business incrementally.
Often, they start a business for practical reasons, such as earning a living, gaining independence, supporting their family, and saving for the future. Solving an existing problem in their community and creating local employment.
While the outcome may not change the world or make them rich, it meets their needs and drives the local economy.
2. Entrepreneurs tend to take more risks than business owners
We’re sold a particular image of the entrepreneur.
The trailblazing innovative risk-taker, embracing the unknown, regardless of what the world thinks.
It’s not the whole story:
While entrepreneurs are innovative risk-takers, they’re far from stupid and often require outside investment to make their vision a reality. Investors don’t invest in dreams; they invest in ideas proven to fulfill consumers’ needs with a guaranteed return.
But entrepreneurs do think and dream big.
They create products and services we didn’t know we needed.
And entrepreneurs often bite off more than they can chew. Hoping they’ll learn how to chew it before they choke!
Coming up with innovative ideas yet to be tested and proven, then having the charisma and determination to convince others to believe in them. Are what makes entrepreneurs unique and why we admire and remember them.
3. Small-business owners are always busy working on their business
Your average small business owner works harder and longer than any employee, looking after the daily chores and keeping the business running.
They have daily, weekly, monthly, and quarterly to-do lists. Such as managing employees, working with existing customers, acquiring new ones, maintaining stock, and bookkeeping. Making it hard for them to stop and think about the long-term future.
4. Entrepreneurs live with their minds in the future
Do they live with their head in the clouds?
No, but they operate on a different level to the rest of us.
Entrepreneurs always have an eye on the future because they’re focused on changing it. To facilitate this, they find the right team to run their business for them. Allowing them to focus on the future, scaling their business to increase profits or make it saleable at a higher price.
Often, they’re already thinking about their exit point so they can move onto their next great idea.
5. Small-business owners love their business
Small business owners are, of course, sentimental about their business. It’s personal to them, an extension of their identity, and a measurement of their ability.
They’d never dream of selling their business because they created it to support themselves and their family. Preferring to hand it down to a sibling who can carry on the family name.
6. Entrepreneurs don’t take it personally
It would be wrong to say entrepreneurs are heartless; however, successful ones go by their gut and the numbers, leaving little room for sentiment.
Entrepreneurs run on passion and innovation, creating their opportunities. Often seeking out significant change, impacting on our modern economy by creating their own expanding markets. And while not all entrepreneurs start a business to sell it, they view their business as an asset, ensuring it’s set up to grow and run without them.
7. Apparently, small business owners tend to be less technical than entrepreneurs!
It’s a new one for me, but apparently, entrepreneurs are more technical!
Perhaps it’s because business owners enter established markets with the infrastructure already in place, solely focusing on implementing what’s available on a day-to-day basis.
However, many small business owners have to learn new skills to run their business, such as eCommerce, SEO, accounting, marketing, and sales strategies. And they all require a level of technical knowledge.
8. Entrepreneurs usually start with a new, innovative idea
But perhaps number 7 holds some truth, as entrepreneurs often create innovative business models, requiring new soft and hardware to support them. Resulting in having to either invent new technologies or seek out those with the necessary knowledge to bring them to fruition.
Entrepreneurs are often a couple of steps ahead of the rest of us, it’s the nature of their success, and if that’s not innovative, nothing is!
Which is better, small business or entrepreneur?
Similarities exist between entrepreneurs and small business owners.
We need small-business owners to hold the economy together and entrepreneurs to propel it forward.
However, neither is superior.
But you still need to answer the question: Entrepreneur vs. Small Business Owner (which are you)?
Because both have different personality types, and if you’re starting a business, it’s good to know your strengths and weaknesses.
So, entrepreneur or small business owner.
Which one are you?
Let us know in the comments below.