Defining a “Small Business Owner” and an “Entrepreneur”

Yesterday, Entrepreneur Magazine and @EntMagazineAmy asked via Twitter: What’s the difference between a “Small Business Owner” and an “Entrepreneur”?

Here’s my take on the question:

A Small Business Owner holds that management position because s/he bought an existing business or franchise, inherited a business, or started his/her own business.

The Entrepreneur is a subset of the Small Business Owner category, based on that last criterion.   However, an Entrepreneur started his/her own business  oftentimes with more innovation in terms of the product or service offering and with distinct strategies and goals (especially if they are “serial entrepreneurs”).  Entrepreneurs are idea-people who create new categories for competition and thrive on addressing unknown business or consumer needs.  (Successful entrepreneurs validate those needs with market research.)  In addition to their passion, they think strategically about launching their ideas and they invest in the necessary marketing and business plans to obtain additional funding and promote their business.  At the most sophisticated level, they don’t intend to be a part of the venture forever; they have an exit strategy based on financial return goals being met.  (More information on how entrepreneurs do business available  in a 4-slide presentation here:

Note: I realize this post makes the Small Business Owner sound generic, but the truth is, I think the whole category of Small Business is problematic.  It’s a broad description for all types of businesses and hasn’t been successfully mapped out and divided up specifically enough, in my mind.  The definition of 500 employees or less is counterproductive to establishing meaningful connections based on similar business challenges.  Under the Small Business umbrella, we have Entrepreneurs, Independent Business Owners, Freelancers, Solo Practitioners, Start-Ups, SOHOs, Microbusinesses, Microenterprises, and Small Businesses.

To remedy the nomenclature issue, I raised the following question on the Arizona Small Business Association LinkedIn Group and would love to get your responses here:

Degrees of Small: What kind of small business are you?

Sure, companies less than 500 employees are all small businesses, but there are subsets, such as Entrepreneurs, SOHO (typically 5 or less), Microbusinesses, Microenterprises, and probably more–each with their pros and cons. I’d like to know which labels members are identifying with and why.  Are there any stigmas or benefits associated with these naming conventions that influenced your decision? Are these labels helpful to you? Why or why not?

2 thoughts on “Defining a “Small Business Owner” and an “Entrepreneur””

  1. Hi Tracy,

    This is so important! There are way too many subsets of people which fall under “small business”…I love how you make the distinctions and comparisons. I help people imagine and create micro businesses – solopreneurships – mostly service based…which is on a whole different level than a tech startup…so it does get a bit complicated. Thanks for creating a discussion about this VERY IMPORTANT topic.

  2. Thanks Susan and sorry for late reply (time warp)! Since you mentioned start-up, here’s another source I find useful called “How Do You Define Start-up?” (and I posted a comment there as well):

    I’m really passionate about getting clarity on the nomenclature (taxonomy?) of “small business” and so I ask questions like ” . . . is the term start-up unique to tech? I think entrepreneurs in that industry lean toward using the term moreso than any others.” There will be more posts on this topic, to be sure! I hope you and others will continue the dialogue here and beyond!

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