How to distinguish correctly between the small business owner and the entrepreneur.
The small business owner and the entrepreneur – is there any difference between the two? Although there are differences between the two, there are also overlaps between them, and many people often use them interchangeably.
In Nigeria, we have a lot of small business owners who mistakenly think they are entrepreneurs. The aim of this article is to distinguish correctly between the small business owner and the entrepreneur.
The overlap between a small business owner and the entrepreneur here is that both may establish what did not previously exist i.e. establish an enterprise.
However, the main goal of a small business owner is to obtain money from the business.
To many small business owners, the business is the primary source of income and the small business owner actively manages the business. Such a business tends to be fragile in terms of market penetration and survival.
For the entrepreneur, the business goal borders around seeking self-fulfilment and aiming to establish a sustainable hallmark.
The entrepreneur does not stay in their ‘comfort zone’ rather, they take the approach of increasing their business performance or influencing the marketplace.
Like the name implies, a small business owner runs a small business. With some exceptions, these businesses tend to remain small. There is an overlap with the entrepreneur in terms of this characteristic.
For many entrepreneurs, at the launching stage, the business manifests by the establishment of a small business.
At the early stage of an entrepreneurial business or a startup, the business process may be small because the entrepreneur cannot afford a bigger business.
Some prefer to start with a small business format because it is easier to control the business processes that way. Another reason is that the entrepreneur may want to minimize risk by starting small.
However, because the entrepreneur is ambitious, innovative and growth-oriented, smallness is just a stage in the business process rather than a characteristic.
Small business owner and the entrepreneur – Capital investment and business growth
The small business owner starts small in terms of capital investment.
Capital investments tend to come through personal savings, family and friends.
Many small business owners are motivated by the immediate profits from the business.
The business tends to remain small and may cease to exist within months.
A small business owner whose business is borne out of necessity with no growth plan is running a business enterprise but is not an entrepreneur.
The entrepreneur is a person who is committed to capital accumulation and business growth.
The entrepreneur is more motivated to perform research and development (R&D) in their businesses.
They may create new technology and make use of networks to advance their business goals.
The overlap here is where a small business have growth orientation – this may qualify such small business owners or managers to be entrepreneurs.
Small business owner and the entrepreneur – Business engagement
So far, we can conclude that small business owners are not necessarily entrepreneurs, even when entrepreneurs are small business owners.
In terms of business engagement, small business owners typically engage in the tried-and-true.
They engage in trading, buying and selling or producing small scale products and services.
The entrepreneur does not necessarily start a new business – some work in established businesses.
However, the entrepreneur is innovative because he tends to engage in and support new ideas, originality, experimentation, and creative processes which may result in new products, services, or technological processes.
Although compared to smaller business owners, entrepreneurs are believed to be risk-takers.
I believe risk-taking propensity is an overlap between the small business owner and the entrepreneur in Nigeria. The reason I say this is because risk is inherent in business ownership in Nigeria.
Having said that, the small business owner tends to be more risk-averse. In order to minimise risks, they are likely to keep their business at a controllable level.
However, the entrepreneur being a more calculating risk-taker, may be able to better navigate the business terrain and do better than the small business owner.
Therefore, while the small business owner may give up in the face of a sudden and unfavourable government policy, the entrepreneur is willing to start again after a business failure.
Small business owner and the entrepreneur – Business funding
Unlike the small business owner, the entrepreneur creates value through creativity and innovation. This helps them to exploit new niches in the market and to establish sustainable products and ideas.
Therefore, this makes the entrepreneur able to find ways to make dealings with funders and other stakeholders who see how they will benefit from investing and cooperating with the entrepreneur.
The small business owner may find it difficult to get funding from investors because the business is less focussed on creativity and innovation of their products and technologies.
Although the business may be unique and distinctive, such businesses tend to be fragile and do not have long-term stability.
For example, this female small business owner did not show any business innovation and did not engage in new business practices or strategies and was unable to convince investors to fund her business.