Entrepreneurs and
Average Small Business Owners -
What's the Difference?

Many people confuses the concepts of small business owner and entrepreneur. Well, an entrepreneur may be operating a small business, but actually an entrepreneur and a small business owner are not necessarily the same. According to the Financial & Investment Dictionary, an entrepreneur is defined as "a person who takes on the risks of starting a new business. Many entrepreneurs have technical knowledge with which to produce a saleable product or to design a needed new service. Often, venture capital is used to finance the startup in return for a piece of the equity. Once an entrepreneur's business is established, shares may be sold to the public as an Initial Public Offering assuming favorable market conditions."

It is this strong emphasis on the "new" that separates the entrepreneur from the average small business owner. The small business owner might be running a new business, it's true, but he's not necessarily doing or producing anything new. He may be following in his father's footsteps, and he's probably engaged in an already tried and true business model and selling products or services that have all been sold before, but just not his way or through his company.

The entrepreneur, however, may be running a small business, but there's something more there. The entrepreneur sees owning his own business as a pathway to real wealth and necessary to bring his new vision into the world. Were he to work for someone else, his time and thoughts would be taken up by that company, he would have to do things their way, and he may even have his concepts stolen from him.

What's more, the entrepreneur if he becomes successful, grows beyond the scope of small business. The typical small business owner may be able to set his own schedule and hire and fire whomever he will, but he is not rich. His profit margin is usually only about 5%. He is independent in the work force, but he is not financially independent. On the other hand, a successful entrepreneur may ultimately generate many millions of dollars in profits and become financially independent.

Although the small business owner can technically make millions of dollars, that's typically over a long period of time. The entrepreneur can become a multimillionaire in just a few years. He also has a far greater profit margin, so much more of his money is actually in his pocket.

Entrepreneurs also have a higher tolerance for risk (that's what makes the bigger payoff possibel). They don't play it relatively safe like small business owners. Greater risks bring greater rewards; such is the law of the marketplace. The entrepreneur is the one building the better mousetrap, and if the world beats a path to his door for it he has tremendous power, as he has hardly any competitors.

New products, new markets, new delivery systems, new forms of organization all may be generated by the visionary work of the entrepreneur.

Return from to the Your Small Business Guide Home Page.