What’s The Difference Between a Traditional Business And a Start Up?

If you are reading this article, then you might be thinking of starting your own business.

Or maybe you are curious about what sort of business you are already running.

You might also be considering getting a degree in business, like a Masters of Business Administration online.

Whatever your reason is, knowing the difference between a traditional business and a start up is important information that will help you no matter where you are in your entrepreneurial journey.

In this article we will outline some of the key differences between these two businesses.

First, the structure of the business.

Perhaps the biggest difference between a traditional business and a start up business is in the business model.

A traditional business will generally have a more conventional business model and will focus on already established audiences and markets.

A start up business can be more experimental, and might try to run off unconventional or untested business models. A start up might also try to find new markets, or create their own audiences. A start up might also attempt to disrupt the markets that already exist.

Second, the growth of the business.

A traditional business and a start up business will have different growth strategies.

A traditional business is expected to favour sustainable and steady methods of expansion.

A start up business might want to expand and upscale much more rapidly.

But a business’s growth strategy can also be determined by the level of revenue a business is expected to receive, or the means through which the business’s funding might come. This leads us to the next difference.

Third, the funding.

The next difference between a traditional business and a start up might be the source of funding.

A traditional business will utilise stable or more secure methods of funding such as bank loans, personal savings accounts, profits, etc.

A start up business might look outwards for external sources of funding. These external sources might be investors, venture capital, government contracts, etc. There are lots of ways to fund a startup business.

Fourth, risk.

A big difference between a traditional business and a start up is in the level of risk a business will be willing to tolerate.

A traditional business will be less willing to engage with risks, preferring safer or secure business strategies.

A start up business can be open to much more risk, prioritising expansion and innovativeness.

Also read: 3 Essential Tactics to Boost Your Business Budget in 2024

Last (but certainly not least), Innovation.

A traditional business will provide goods and services that might be better recognised or serve the general need of their customers or audience(s).

A start up business might try to introduce new products or services and disrupt, create, or appeal to markets or customers.

The distinctions between a traditional business and a start up business aren’t always this black and white, and there may be other factors to consider, but these are usually the key differences.

Examples of traditional businesses and a start up businesses

Some examples of a traditional business might be: cafes and restaurants, retailers, production of goods, etc. These usually include small or local businesses, too.

Some examples of a startup business might be: Digital companies, content creators, app developers, etc. But start ups don’t always have to be digital – they just tend to be digitally focused lately because of the era we are living in.

Start up businesses often provide new products or services, or perhaps provide older products or services in a new or unfamiliar way.

The most famous examples of start up businesses include Uber, Netflix, Facebook, Instagram, DoorDash, etc.

Which is ‘better’?

After reading these differences you might be asking yourself, which of these two types of business is ‘better’?

Well, both traditional businesses and start up businesses have their pros and their cons.

The real question you should be considering is: What’s better for you?

Knowing which of these two business is better for you comes down to:

• Knowing what sort of business model you will want to follow.
• Planning your growth strategy.
• Looking at the source of your funding.
• Thinking about what level of risk you will be willing to take on board, or how risky your business idea will be.
• Considering how innovative your business will be.

Once you have thought about all these factors you should come to a better understanding of whether a traditional business or start up business is better for you.