We have previously explained that a start-up is not just a new business.
A “start-up” takes up the task of doing something new. A new business that is not a start-up follows traditional business models and processes.
The start-up is riskier. The risk of loss is higher. It also has the potential for much larger rewards and a much quicker timeline than a non-start-up business.
With many companies adopting technology and converting to digital business models, it can be difficult to know which path the business is on. This is often a recipe for failure.
A start-up and non-start-up path are mutually exclusive. Fundamentally, a business has to decide what its focus is. This allows the business to chart the correct path and send the right message to the team as they help implement and influence the business tactics and strategy the business follows.
Comparison of Common Characteristics
Here are some of the more common characteristics of start-ups and new businesses:
| Start-up | New Business | |
| Legal Entity and Compensation | Corporation with shareholders with equity awards to early employees. | LLC, Partnership, or S corporation with distributions to owners. |
| Employment Agreements | Agreements provide say that work is at will and include pre-defined exit and severance terms. | Agreements state work is at will and may include non-compete clauses. |
| Ownership of Intellectual Property | The business has employees execute agreements that clearly assign any and all IP over to the business. | Business relies on state law that awards most IP to the business. |
| Entrepreneur | One entrepreneur who has the authority to devise and execute on business strategy. | May have more than one entrepreneur who has the authority to devise and execute on business strategy. |
| Management Control | The founder willing to give up control and step aside when profit potential arises. | The founder is not willing to give up control or step aside when a profit potential arises. |
| Funding | Third-party funding is more common. | Self-funding is more common. |
| To Survive, Primary Focus Needs to Be On | Customers or users and value of the business. | Founders or owners and owner profits. |
If you know which type of business you have, a start-up or a new business, this chart can help you make basic decisions about how to move forward with the business.