6 key differences between a Startup and an SME

The lack of clarity to differentiate a startup from an SME affects business management, as it generates confusion that leads to the creation of ambiguous objectives and misdirected strategies.

In this blog we help you to know exactly the essence of each one, so that you achieve the objectives you set for your business.

Although both business models require entrepreneurial character, the reality is its essence is different.

What is a startup?

Startup commons, an organization specialized in business development, defines this business model as an entrepreneurial talent team that develops innovations in an identifiable and bankable way.

This type of entity remains in constant progress to verify the value of the innovation created and has the ambition to grow rapidly, with a scalable model that allows maximum impact.

That is, it is a newly created company that mainly relies on the technological field to grow.

What is an SME?

For its part, Portal Pyme indicates that an SME (acronym for small and medium enterprises) is a generally traditional business that seeks long-term profitability.

Who is in charge has as main objective to discover a viable and sustained business with a profitable business plan in the short, medium and long term.

Unlike a startup, whose focus is innovation, the SME focuses its operations on generating profitability.

Main differences between a startup and an SME

According to the TheForbiz business platform, the basic differences between startups and SMEs are summarized in:

• 1. Focus

In general, an SME is focused on serving the local or national market, while startups focus on geographically wider regions, including global ambitions.

• 2. Innovation

Although SMEs have technologies, they do not necessarily need to make a radical innovation to operate. In the case of startups, they are focused on innovating in their production processes to create a differentiated business.

• 3. Work team

SMEs work locally, that is, their work team is in the same place and they have varied profiles. For their part, the collaborators of a startup are anywhere in the world and need to have strong technological capabilities.

In addition, the SME usually consists of a single founder, while startups are created by teams in which the partners have different and complementary skills.

• 4. Level of risk

The idea of ​​a startup's natural evolution is to grow to dominate a market niche and be acquired by a third party; If this does not happen, you must close. Instead, SMEs have the opportunity to learn from failures and improve.

• 5. Financing

While the SME is a family business or requires little external financing, the priority of a startup is to obtain investment from third parties to achieve its goals.

• 6. Growth

For its part, the SME seeks from the beginning to maintain a linear and rapid growth, while the startup loses money at the beginning and subsequently grows exponentially; It is focused on scalability.

What is a reality is that the startup can become an SME, because the difference between them is not in the product or service as such, but in scalability, the degree of innovation and impact; As Forbes magazine points out.

Entrepreneurship with a startup or an SME?

As you realize, the two business ideas represent great opportunities for those who wish to enter the business world. In fact, the Mexican Chamber of Commerce CANACOPE, highlights that the main advantages in the startup and in SMEs are:

Advantages of a startup

• It is a young company: it is characterized by starting as a small business but with the ability to evolve and become a successful company.
• It is scalable: it grows faster and faster over time.
• It is related to technology: it develops very innovative ideas to meet the needs of the market.
• It has small costs: it has reduced costs compared to the profits it obtains.

Advantages of an SME

• It is more agile and flexible: it is easier to modify important aspects of its structure.
• It is closer to the client: they are more oriented to the needs and desires of the client to better meet their demands.
• It satisfies niches little or not at all profitable for large companies.
• Your workers get more involved: there is a closer relationship between team members.

Take your idea to success

Just as both entrepreneurial ideas have differences, they also have similarities when defining their objectives: they want growth and solidity.

Identify what suits you to develop that business you have in mind and start successfully.