This Skin We're In by Dale Beermann

Entrepreneur or Small Business Owner? Does it matter?

A while ago I wrote a slightly controversial post that mentioned the differences between small business owners and entrepreneurs. Since then, I continue to have discussions with people about this difference. Specifically, does it really matter?

I'll reiterate that the main characteristic of an entrepreneur, in my definition, is the desire to innovate. I asked the question on Twitter about what exactly people thought this difference was. Here are some of the answers:

via @GregDigneo: When I think small business owner, I think pizza shop. When I think entrepreneur, I think google, virgin, microsoft

via @RochelleDelong: entrepreneur: creative, high energy, loose systems. small business owner: creative, steady energy, reasonable systems.

via @tjdooley: Gut reaction is entrepreneurs pushing new ideas vs small business owners using existing ideas/business models.

So people obviously understand that there's a difference. But why make it?

The Problem with the Definition

A small business owner is not necessarily an entrepreneur. In fact, an entrepreneur isn't necessarily a small business owner. As Wikipedia mentions, Entrepreneurship can also involve revitalizing mature organizations, not just starting new ones.  It's a blurry definition, and based on an individual's ability to innovate rather than the act of starting or running a company. Therein lies the issue. We commonly give ourselves titles based on our actions rather than who we are.

I am a software developer and I am an entrepreneur. One title defines what I do, the other defines who I am. To build on the post about serial entrepreneurs, this is another reason why you shouldn't introduce yourself to someone as a serial entrepreneur. Apart from being incredibly annoying, people don't commonly introduce themselves by their personality traits ("My name is Dale and I have the ability to innovate!"), but rather by their occupation. Entrepreneur is not an occupation.  Neither is Serial Entrepreneur.

Who Cares?

Ok, so I'm nitpicking the definition of entrepreneur. Well I actually think that it matters. First, it matters to yourself. I think that it's important to have an understanding of who you are and what your goals are. The way you run your business is going to be dependent on those goals. Is your goal to provide a stable income for you and your family or is your goal to change the world?

There are going to be a couple other people who care about your goals as well, especially if you're trying to raise money.

To an angel investor, the difference may not actually matter. Angel investors may potentially invest in small businesses that aren't geared for high growth but have a higher probability of success. To a venture capitalist, however, it certainly matters. I doubt many VCs look for companies that have a plateau in their financial projections. I couldn't sum this up better myself: "Choosing the label entrepreneur is choosing growth."

What about lending institutions? Banks probably aren't going to be willing to give money to your high-growth startup right out of the gate. It's possible that micro-lending groups would (we have a couple here in Wisconsin, such as WWBIC and WHEDA), but the sums of money are typically smaller, up to $100K. There are SBA loans, up to $35K, that you can use to start your business as well.

Regardless, lending institutions aren't necessarily concerned with whether or not you're an entrepreneur or a small business owner. They're concerned with their level of risk in the investment. Not only is it incredibly risky to fully fund a company with debt but most banks won't even lend to startup businesses that don't have two to three years' worth of financial statements.

Small business is typically less risky, which is why they will be more willing to take on personally-backed debt.  Angels and VCs exist to take on part of the financial risk in starting a company, in exchange for equity.

It's Just a Label

It's true that nobody really cares about the name. But as a business owner, you should be aware of what your goals are and the people best suited to help you achieve them.

Are you following me on Twitter?

My Social, Social Media Experience

I went to my first Tweetup last weekend.  Before I say anything else, let me first point out how awesome it is that Madison has an amazing group of people doing this stuff.  For anyone interested, there's a social media breakfast being organized for a week from today as well: http://search.twitter.com/search?q=%23smbmad.

So I went to a Tweetup and I met some really cool people.  What struck me was that this is the culmination of what social media should be.  I had a few "real life" friends that I knew were going.  I also knew a few people through Twitter.  But everyone there I knew within three, and most likely two, degrees of freedom.  I'm a pretty social person but if that wasn't the case I might not have shown up.  I'm sure there are other people that feel this way.

This is why social media is so powerful.  You do what your peers do.  Social media provides a unique outlet to grow that network.  As marketers are realizing, it's also a unique opportunity to influence those people in ways that weren't possible before.  In any case, the reason that social media, and the Tweetup phenomenon, is so successful is that there is already an implicit level of trust in that network.

Social media is a lot of different things to a lot of different people.  A lot of people have been at work trying to define social media as well. For a humorous take on what it means to some people check out this post on fanboy.com.  To me though, Social media is a way to find other people interested in the same things that you are.

I think about how you met people with similar interests before social media.  Generally, it was through your group of friends.  If you were really motivated you might use the newspaper to find out about local hobbyist groups.  Way, way, way back in the day we actually had something similar to current social media through the old Bulletin Board Systems (Yes, I'm a geek, and yes, I dialed up to BBSes on our Apple II with a 300 baud modem).  Now, if I want to find someone near me who's interested in skiing, I can just search Twitter.  I love it.

For me, social media is all about enabling interaction with like-minded people, even if just digitally.  I had a great experience at my first Tweetup and I'll be sure to attend more in the future.  When I do though, I'll also be sure to explain to my girlfriend the Direct Message I got on my phone a little more clearly: "Great meeting you last night. We should definitely do that again sometime.  :)"

To An Entrepreneur, Money is Happiness

Image by luismi1985 via Flickr

The topic of money has been on my mind quite a bit lately.  I want more of it.  Not because I want tons of lavish things but because I get really stressed out when I don't have enough.

I bought and renovated a house almost three years ago now.  I love that I did it, but since then I've been constantly stressed out about making my mortgage payments.  Thanks to my amazing younger brother I haven't missed one yet, but it's come pretty close.

As a founder of a small start-up, I also think a lot about money during work.  For more than two years, we've been talking about our "runway," or how long our company will survive without more funding.  It's always the elephant in the room.

The things that make people happy are most often not directly related to money.  Another member of Brazen Careerist mentions in a post that genetics can even play a role.  However, one of the biggest reasons people are unhappy is because of stress.  And one of the things that an entrepreneur is most stressed out about is money. 

For an entrepreneur, nearly everything revolves around money.  Product decisions are made based on it.  Hiring and marketing plans are dependent on it.  The amount of money a company has can even affect it's overall business model.  Furthermore, without enough money, significant effort has to be spent to find more.  This is a full time job and can severely detract from a company's ability to focus on its products.

I've mentioned before that one of the key characteristics of an entrepeneur is the overwhelming desire to innovate.  More than any one thing, this is what motivates us. A lack of adequate funding has a direct impact on our ability to focus on innovation.  As a result, every aspect of the business suffers.

Unfortunately, we've heard a lot in the news about what happens when companies run out of money.  As funds begin to dwindle, layoffs start and don't end until the company can extend its runway to a comfortable length.

After the layoffs, how does a company continue to operate?  Here's a list of some things that startups should think about when they're running out of money.  I have a few thoughts and additions as well:

1. Set realistic goals.  Understand how long it's going to take to execute your strategic plan.  Be pessimistic that you can make it and ensure that you can accomplish what you set out to do.
2. Constantly re-evaluate your goals.  It's incredibly difficult to determine how long it will take to execute your strategic plan.  It's a good idea to come back to it every month and make sure you're on track. 
3. Outsource, if possible. I really do believe that the world is flat, especially coming from an IT background.  Outsourcing isn't an option for everything, but it can be very cost effective.
4. Give up equity. Without money, it's probably the one thing that your company can give up to achieve its goals.  Nobody wants to have to do it, but an exchange for equity may be the only way you can get something done.

There's no way to get around the fact that money will drive many of the decisions an entrepreneur has to make.  However, be sure you have a firm grasp of what it is you're trying to achieve and how long it's going to take to get there.  You might just be a little less stressed out as you head down the runway, and hopefully a little happier.