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Five Reasons why Entrepreneurship Isn’t Quite Business


Good entrepreneurship eventually leads to good business.  But here are five reasons why the two start out different:

1. Framework

Startups may be inventing either a new product or a new service, but quite often they’re also reinventing a business model.  Good businesses, on the other hand, already know how they’re going to make money.  Good businesses therefore always have this framework in which they can adapt to changing circumstances, but startups usually search for a bit before they figure out what it is that they’re doing.

2. Customers

Startups have no customers.  Businesses focus on the omni-present “voice of the customer,” but startups have to go to extraordinary lengths to find this.  They have to develop a product, get it in front of possible customers, and get their feedback.  Sometimes, the first “customers” you talk to turn out not to be your customers at all.

This “lack of customer” means many startups have under-developed or non-existent sales and marketing teams.  Many high tech startups bet the farm on a single big product unsupported by secondary revenue.  If this is the case (and that’s a capital-intensive strategy), you’re much better off thinking about the “company” as a product development team than as a business.

3. Processes

Startups have no established ways of doing things.  Good businesses have written processes and procedures AND, less commonly but even more importantly, built-in rules for changing the process.  This is at the heart of why so many startup investors place so much stock in “the team.”  Good businesses make it possible for ordinary folks to do extraordinary things.  Good startups almost always rely on extraordinary folks.

4. Resources

Startups have what seems like too little time and usually no money.  Good businesses operate on long timescales with the ability to forecast, budget, and invest.  If you’re at a startup, you have to be extremely adept at balancing long-term goals with immediate needs.  Many of the building blocks of a real business will seem unaffordable at a time when maybe you should be paying for them.

5. Independence

When you start something new, no one tells you what needs to be done.  If you fail to do what matters, your venture fails.  In good businesses, there are mechanisms whereby individual accountability is reinforced from the outside.  Customers call you back to find out why you haven’t finished their project, your boss tells you what your goal is this week, the manufacturing floor tells you what you need to fix, etc.  But when you’re in a startup, you really don’t have a lot of buttressing.  Everyone must be highly accountable to themselves with good follow-up techniques and task list management.