last updated 26/05/2022

Entrepreneur vs. business owner – how deep do the differences go

You already know that both entrepreneurs and business owners run a business, sell products or services, and employ people. That much is clear, but how do you differentiate between them?

It’s simple, just answer this question: What do all great entrepreneurs have in common?

Think of Henry Ford, Sam Walton, and Elon Musk (or any of your favorites). ‘

Ford originated the mass production of cars,

Walton built warehouses to save on shipping,

and Musk has opened the door to space traveling with reusable rockets.

Can you see what they have in common? They all created something completely new. And it’s this innovative streak that sets them apart from business owners.

Let’s look at the definitions for the two terms to further understand the difference. The Oxford Dictionary defines an entrepreneur as “a person who organizes and operates a business or businesses, taking on greater than normal financial risks to do so” and a business owner as “an individual or entity who owns a business entity in an attempt to profit from the successful operation of the company.”

To further differentiate between entrepreneurs and business owners, here is a list of defining differences.

Reasons for starting

Entrepreneurs and business owners start their ventures for different reasons. An entrepreneur starts a venture around an original idea, product or service.

They develop and try to perfect something that the world has not seen before. Their intention with their innovation is to develop a new way of doing things, or to make the world a better place. The effect is a disruption of the status quo.

Two excellent examples are Airbnb and Uber.

Airbnb owns no hotels, but it rents out accommodation; Uber owns no taxi fleets, but it offers taxi rides.

Business owners aim to avoid working for someone else by creating a job for themselves. There is an existing product or service that they believe in and also believe that they can improve on while making a living from it.

A business owner may learn the business from a family member and take it over, or come into some money and decide to open a business. Someone may also open their own business after working many years in the same industry. They don’t start something new; they build on existing business models, processes, products and services.

Examples are opening a spa, a restaurant, or a dry cleaners. Business owners try to differentiate their business by doing a better job than the existing businesses.

In recent times, employees have also revolted against corporate America, leaving their jobs in droves to start their own businesses and rather work for themselves.

According to figures from Guidant Financial, 11 percent decided to start their own business after being laid off. The same percentage did so because they were not ready to retire.

Business owners provide a service or product that already exists and for which there is a demand; an entrepreneur spots a previously unnoticed gap in the market and create something innovative to fill it, often spawning a completely new market or industry.

Their vision differs

Business owners envision employing people to work for them, providing the best product, creating the lowest prices, making the best ice cream, providing the fastest delivery times, driving profitable growth, making buying property easy and fun, satisfying customers.

Entrepreneurs have a different mindset. They envision an innovative solution to one of society’s problems and some may even envision solutions to problems that society doesn’t realize yet.

Unilever Young Entrepreneur Awards finalist, Samir Lakhani, started a startup to solve one such societal issue. Clean water and soap are luxury items for many people in lower-income countries. Three billion people do not have a handwashing facility with water and soap at home.

Lack of soap prevents people from regularly washing their hands and fosters the spread of infectious diseases. In the meantime, hotels in higher-income countries throw away an estimated 5 million bars of soap daily. Lakhani seized upon this opportunity.

His startup, Eco-soap Bank, turns discarded bars into affordable Eco-Soaps, creating jobs for local women and helping communities to be cleaner and healthier.

Bruce Bachenheimer, clinical professor of management and executive director of the Entrepreneurship Lab at Pace University describes the entrepreneurial mindset as follows: “At its core, [entrepreneurship] is a mindset – a way of thinking and acting.

It is about imagining new ways to solve problems and create value. Fundamentally, entrepreneurship is about … the ability to recognize [and] methodically analyze [an] opportunity and, ultimately, to capture [its] value.”

For their part, business owners are not focused on groundbreaking solutions.

They study their industry and the prevailing market trends, applying proven marketing principles to succeed. They are focused on providing the best possible service and products, serving their customers, and growing their business. Business owners also work hard to establish a valuable brand.

How they differentiate themselves from the competition

Business owners try to beat the competition by following proven marketing principles. They work on producing superior products, excellent services, customer satisfaction, and compete on pricing.

Entrepreneurs are trailblazers: they don’t compete by doing something better; they compete by being the first to do something.

Their focus is on scaling their offering as fast as possible so they can capture the market out of the blocks and dominate it from the start.

The need to scale or not – Business owner vs entrepreneur

Continued profitability is often more important for business owners, especially small business owners, than growing the business. For the most part, small business owners are satisfied to run their business and maybe open one or two more stores, but have no aspirations to go nationwide, let alone expand globally.

There are, of course, business owners who work hard to grow their companies and expand to other markets. They employ more people, increase product offerings and production, and embark on marketing campaigns.

Entrepreneurial ventures, on the other hand, owe it to investors to target rapid growth and high returns. Venture capitalists only part with funding money for ventures with high growth potential; they risk their capital with the express aim to benefit from high returns in the future. This incentivizes founders to scale their ventures as soon as possible.

Entrepreneurs aim for explosive, not gradual growth. From the outset, they expand across the country and go global. They want to have a global customer base.  

Starbucks is often mentioned as an example of explosive growth. Starbucks grew from a single store in Seattle’s Pike Place Market to 30,000 retail stores in 80 markets by transforming coffee from a common hot beverage to a luxury experience.

Because of their explosive growth and innovative offerings, entrepreneurial ventures often have a massive impact, not just on the local economy, but globally. The majority of businesses have a more localized impact, especially small to medium-sized businesses, which dominate the global economy.

Appetite for risk

Business owners and entrepreneurs tend to approach risk differently. Business owners tend to take calculated risks intended to gradually grow their business.

For the most part, they are cautious and don’t do anything that would risk their company. Of course, nothing ventured, nothing gained, so business owners do take risks but not to the extent that entrepreneurs do.

Entrepreneurship is inherently risky. Stories of entrepreneurs who sold everything they own to get their idea off the ground abound.  

Entrepreneurs enter unchartered waters and take on risks that can’t be calculated or predicted.

For entrepreneurs that create a completely new product or service, there are no existing business models to base their decisions on.

On the one hand, they believe in their innovation and want to make it available at all costs; on the other hand, there is simply no way of knowing if it will work and take off.

And more often than not, it doesn’t. Ninety percent of startups fail and 21.5 percent fail within the first year.

Let’s not forget that many entrepreneurs are young, idealistic individuals who don’t have much life experience. Like most young people, they follow their passion regardless of the risks.

Elon Musk, the most successful entrepreneur of all time, running several successful businesses that he started from nothing, has faced bankruptcy more than once.

Yet, he forged on.  SpaceX is estimated to be the second-most-valuable private company in the world. Tesla is the world’s 6th most valuable company by market cap. Both companies have faced bankruptcy in the past.

Business owners are cautious when it comes to risk.

Most will only consider a bank loan if business projections are positive. Larger companies will leverage the services of business analysts and the power of big data to underpin important business decisions that may have a far-reaching impact.

To be fair – it’s not that entrepreneurs are ignorant of the power of data to inform decisions; there isn’t any applicable data available in the beginning. There is no existing customer base, no sales figures, and no comparable market or competitors. It’s a question of do and see what happens.

Their goals – Small business owners vs entrepreneurs

Business owners are out to run a business that converts, serves, and retain customers Business owners tend to aim to refine an established product or service and processes to address the needs of existing customers. Their goal is to streamline their operations to ensure profitability.

Most small business owners want to keep their businesses manageable and profitable.

Entrepreneurs take it a step further. They focus on scaling their business to produce as much as possible within a reasonably short time to generate maximum profits. Many of them have an exit strategy – going public or being acquired for a sizable sum.

In general, business owners don’t have a plan to grow their company in order to sell it at a profit. In fact, many company owners would never consider selling – they’d rather pass the business onto a family member or loyal employee.

Business owners often associate their personal identity with their role as the boss of their own concern. Entrepreneurs, on the other hand, are ready to move on to the next big idea once they’ve sold off their enterprise.

What do they have in common?

Although there are some real differences between entrepreneurs and business owners, I’m sure you’ll agree it’s not a clear-cut affair. Nothing in life is that black and white.

For instance, it’s not only entrepreneurs that are passionate about their ideas. Small business owners and business owners of large enterprises can also be passionate about their life’s work.

In fact, it’s the passionate personal trainer that has the most clients and the passionate CEO that inspires the company workforce to take the company to new heights.

Both entrepreneurs and business owners are leaders.

Regardless of the size of the venture, both entrepreneurs and business owners take a leadership role in their ventures. Both are also answerable to stakeholders. Larger enterprises and startups that take on venture capital have company boards that they are accountable to.

Attracting and retaining customers is central to running any size business successfully. No matter how revolutionary an entrepreneur’s business idea is, the venture is moot if no customers arrive to try the products or services out.

And if the initial enthusiasm of users isn’t followed up by them becoming loyal customers, the venture is also doomed.

For the most part, entrepreneurs begin a venture because they are passionate about their product or service that will bring significant advantages for people.

They are not per se business people who know how to run a business and need to hire financial experts to develop a business plan that will ensure revenue in the future.

Apart from people who have earned an MBA and then run a business, most business owners also don’t have business degrees. And those who are serious about scaling their business and outperforming the competition also need to employ financial experts to help them reach their goals.

Final thoughts

While there are distinct differences between entrepreneurs and business owners, there are also many instances where their roles overlap.

At the very least, neither of them wants to work for someone else; they are intent on finding their own way to support themselves while delivering a service to others.

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