What is the difference between a small business and a startup?
A startup is a company that is in its beginning phases and is still testing market viability fine-turning products and seeking out investment capital. A mature business is established within its industry, knows how to reach its target market and is generally self-sufficient. Startups are still in the process of proving their concept, while mature businesses have proof that their business plan can succeed in the form of sales.
While all businesses have unexpected challenges and setbacks, mature companies are better equipped to resolve company issues. Problems typically occur less frequently at mature businesses because they have industry insight and expertise from trial-and-error. At a startup, leadership and employees are often learning as they go, developing best practices based on failures and successes. Mature companies can confidently implement consistent methods to carry out a long-term strategic plan.
Understanding the business life cycle
Businesses typically go through a growth phase as part of the business life cycle. A business can be considered a startup from when the idea is first formed through the first product launch and several rounds of funding. Likewise, a mature business may not yet be profitable. To understand if your company has shifted from startup to mature business, review these stages of a business’s lifespan:
- Development: The concept phase, also known as the seed phase, occurs when you develop a business idea and start to determine its market viability. Business owners have to educate their target audience about their product or service and seek out feedback to improve the idea. During the development phase, a business is a startup that relies on outside funding to survive.
- Growth: The initial growth phase occurs when your business starts to have higher volumes of customers and sales. The startup now has to adapt to fill the market demand and problem-solve for ways to keep up with an increased growth rate. Businesses in this phase are usually still startups. Although they are starting to make money, they may need investments to grow the business and build a recognizable brand
- Survival: Some companies start to truly mature at the survival phase, while others could have more characteristics of a growing startup. At this point, growth may have tapered off and the company spends most of its efforts finding ways to encourage repeat purchases from existing customers or target new markets. Companies in the survival stage should be able to support themselves financially or have a clear path to financial independence that makes investing in the company less of a risk.
- Success: When a small business can fund its own expansion, it is firmly in the success phase of its company life cycle. Successful small businesses have the ability to overcome obstacles without disrupting the day-to-day operations of a business. They have market share and customers seek them out and recognize their mission and identity.
- Decline: Even a successful business can experience a period of decline. Changing economic conditions or consumer tastes can cause a mature business to fail if it is unable to adapt. Startups in the growth phase may have periods of volatility where sales rise and fall drastically, but the decline phase of the life cycle is generally more gradual, especially because mature businesses can leverage existing customer relationships to slow down losses.
- Exit or renewal: The end of the business life cycle occurs when the business owner exits the business by selling it to a buyer for profit, or responds to lower profits by re-focusing the company and making major brand and product adjustments. This new concept then goes through its own phase of development and growth.
Related: How to Grow Your Business
Signs that your business has matured
Here are several signs that indicate your business has completed its first phase of growth and can support itself as a mature company:
Startups are based on an idea that needs to be developed and refined to fill a consumer need. Mature companies have gone through the phases of prototypes and product testing, making adjustments to emphasize the most successful features and editing the design to remove the aspects that were less appealing to customers. Startups often regularly tweak their packaging and design suite to make their brand more attractive, while mature companies tend to keep their branding consistent so consumers can recognize their company.
Mature companies have long-term analytics that show growth over a period of time. A startup going through a period of growth caused by positive press may have sales that indicate success, but the company needs data to back up long-term growth to be truly mature. Mature businesses usually have a steadily increasing growth rate that allows for reliable long-term projections.
If customers start to associate a certain product or service with your company name, you may have a mature business. Word-of-mouth advertising is common for mature businesses because they have a reliable customer base that advocates for their products because they relate to their branding. Mature companies are able to demonstrate expertise and build a reputation for being an authority in their field.
Ability to delegate
Once your business starts to mature, you should be able to delegate tasks and spend more time leading than micromanaging or doing everything yourself. If you find yourself able to hand over operations and take a vacation, you may have a mature business.
Employees who have grown with a business are also a sign of maturity. They have institutional knowledge that they can share with new hires to lessen growing pains. Additionally, having long-standing employees shows that your turnover rate is low and that you have learned how to properly manage your workforce.