Tech Startup vs Small Business: Think You Know Which is Better?

Tech startups are definitely declining in popularity as investors have slowed their roll as of late, largely due to serious losses at the hands of disappointing IPOs made by “billion-dollar” companies that failed to convince the stock market of their over-inflated evaluations. Of course, that doesn’t mean Silicon Valley is dead, but seed and angel investors are indeed taking a more measured approach at what they put their money into.

What this means for up-and-coming entrepreneurs is that the time to hop directly on the first tech train that comes your way has passed. Unless you’ve got a really good idea and team backing you, the days of unrealistic valuations has passed — no more free lunches. That doesn’t mean the situation’s hopeless, far from it.

There’s never been a better time to start a small business of some sort, online or off. Gigging is also become a popular outlet for entrepreneurs seeking to pivot away from being a corporate drone. Keep reading on and I’ll briefly help you decide which is the better option for you as we fast-approach 2018.

startup vs small offline business: which is better?

SMBs fill an existing market demand.

There was zero market demand when the Zucks launched Facebook in 2004. Say what you will, but he was operating on a ‘whim’ that his social network would be the hit it is now. I seriously doubt he ever thought it was a billion-dollar idea, either given that he built it initially just for his fellow Harvardians. Of the few successful social network launches that have happened throughout the years, most have failed. Since tech startups rely largely on getting their ideas funded in order to grow, and investors are slowing down, this doesn’t paint a great picture for launching a tech company in the virtual space.

Compare the uncertainty of the tech space with that of setting up a business intent on satisfying a legitimate, market proven need. We all need plumbers, accountants, bars, cleaners, financial advice, restaurants, and retail outlets of all kinds. We need access to babysitters and people to walk our dogs and care for their needs when we’re on vacation. A small business owner gets business by advertising and attracting customers to their business by differentiating themselves from the competition — not by selling an investor on a concept with no proven marketability.

Instant revenue opportunities with SMBs.

Few startups begin generating revenue soon after launch. Instead, they focus on market research and building perceived value in order to attract investors. Occasionally, investors will “pay” founders a salary after the first funding round or two, but most times not — and when they do fund, startup founders lose a certain percentage of control of the company. Essentially, most are backed into a corner from day one, fighting to get funding and forced to put their own financial goals on hold in the first years.

tech startup or small offline business: which is better?

Image Credit: Ikhlasul Amal/Flickr

Contrast with a small business operating in a proven market, not only is making money in the first several months a probability, it’s virtually guaranteed if you apply the right revenue model, marketing and customer service tactics. While the money might not be great in the first year or two, small business owners are empowered to make actual revenue from day one.

Startups offer no guaranteed long term benefit.

I’ve often heard of most tech startups likened to a bright fuse that burns out quickly. After all, the goal, in most cases is to build up to a max evaluation and sell, or release an IPO — bow out — rinse, recycle, repeat with a new idea. Not all tech startups are put together with this purpose in mind, but many are. Consider the Facebook example from above: Had Facebook not systematically taken over, Zuckerberg and crew would have scrapped the platform and put their skills toward something else — the vision was limited to a college intranet when it was launched after all.

A small business is almost entirely launched with the purpose of growing it into something sustainable for the founder and/or their family. They launch with the plan to service a market demand, employ people in their community and usually to pass the business on to the next generation of family members. A small business doesn’t plan on selling for a profit, or fizzling out as new trends emerge in their space.

tech startup or small offline business?
Image Credit: David Clow/Flickr

Which is best for you?

Truth is, I can’t tell you that. Just how much of a gambler are you?

Do you want to put all your eggs into one basket for the next two or three years, with the potential of a million-dollar return in a risky yet lucrative tech startup idea?

Are you looking for long term — building and branding while working 9 – 9 working a J.O.B. — building your business as an invested employee first with the hopes that revenues will continue to grow and make you wealthy, even rich?

There are benefits and drawbacks to both. Only you can decide which is best?

Main Image Credit: Cheeky Needle/Flickr