Small business

A company built to be profitable and sustainable at a size the owner chooses, rather than to grow as fast as possible.

Example

An agency with eight staff earning the founder $400k a year is a superb outcome — and a terrible venture-backed startup, because it cannot return a fund.

Important

Most venture money is wrong for a small business. Taking it commits you to a growth rate the business does not need and may not survive.

Related terms

• Startup — A new company built to grow fast by finding a repeatable, scalable business model. The defining feature is the search for scale, not the age of the company or whether it uses technology.
• Bootstrapping — Funding the company from your own money and from revenue, rather than by selling equity.
• Venture capital (VC) — Professional investors who manage a fund of other people's money and invest it in high-growth startups in exchange for equity.

Lessons that explain it

• What actually is a startup? — A startup is not just a new company, and it is not the same thing as a small business, an agency or freelancing. The difference decides how you fund it, how fast you must grow, and what counts as success. (12 min)

All 176 terms in the Founder glossary