The Difference Between an Entrepreneur and a Business Owner

What do you call someone who runs a business: an entrepreneur, a CEO, a business owner, a manager, or a runner? Being called any of these depends on interpretation, just like a person might disagree with another on what makes someone an entrepreneur or a business owner.

Oxford Dictionary defines an entrepreneur as “a person who organizes and operates a business or businesses, taking on greater than normal financial risks in order to do so.” Since 90% of startups fail, entrepreneurship comes with obvious risks.

Though no exact definition exists for a business owner, Shopify defines it as “one person who is in control of the operational and monetary aspects of a business.” Entrepreneurs fall under this category. However, business ownership does not entail the same level of risk entrepreneurs face.

Other differences between the two terms go beyond their definitions to include;

– Risk Positivity vs. Risk Aversion; Launching a business involves risk, and entrepreneurs tend to take on a lot more of it than business owners. For example, an entrepreneur might aspire to revolutionize an industry, while a business owner starts a business with a tried-and-tested model. Though both deal with risk, entrepreneurs tend to lean into it.

– Innovate vs. Make Money; Entrepreneurs and business owners often have different motives when starting out. Both likely want to make money and build something from the ground up. That said, entrepreneurs often aspire to change the world or industry they operate in, while business owners aspire first to make money. Consider the difference between a Silicon Valley AI startup and a local bookstore.

– Long Term vs. Short Term; Profitability expectations create a big difference gap between entrepreneurs and business owners. Entrepreneurs tend to launch ventures that involve more long-term risk and therefore less short-term profitability. Business owners, however, usually want to see profit in the short term, as they typically use more proven business models, strategies, and products.

– Individual vs. Community; Business owners involve themselves in their communities, often by sponsoring school groups or donating to local charities. Their motives might include garnering a positive reputation in their community or offering jobs to locals. Entrepreneurs have fewer concerns over the impact their business makes on their community. For example, they might outsource professionals to help build their business — regardless if they live around the company’s home base.

– Incorporated vs. Unincorporated; The difference between an entrepreneur and a business owner can even come down to their incorporation status. One study featured in The Quarterly Journal of Economics found that entrepreneurs usually run incorporated businesses, while business owners run unincorporated ones. The researchers explained that this likely comes down to small businesses performing more routine activities compared with entrepreneurs, who tend to take on more risks and therefore require personal legal protection. Incorporation legally separates the founder from the business, whereas an unincorporated business falls under the owner’s personal liabilities.

– Rule Breaker vs. Follower; That same study found that entrepreneurs engage in more rule-breaking activities than business owners. The study discovered that successful entrepreneurs often engaged in risky behavior, such as ditching classes, shoplifting, gambling, and more, before becoming founders. Entrepreneurship necessitates risk-taking and bending the rules, whereas business owners usually fall in line with the status quo.

Inaccessible Capital vs. Accessible Funding; Almost 8 in 10 small businesses use personal funding to get started. Eventually, they may seek funding from banks, private investors, and others. In general, entrepreneurs have access to a more diverse array of funding. For instance, venture capitalists invest primarily in businesses with high-growth potential. Business owners may find it more difficult to get investment, and they typically rely on local banks for loans.

– Local Growth vs. National Expansion; Entrepreneurs usually have more ambitious goals for their business. Most want to expand their business nationally, and some aspire to grow globally. Business owners often stay local, focusing their growth efforts on local and regional customers.

– Stability vs. Volatility; A business owner often manages their shop’s day-to-day operations. In the long term, they expect to maintain oversight while hiring a few other employees. Many entrepreneurs launch ventures with the goal of expanding the number of employees as the company scales. This may include hiring managers and other executives, and possibly selling shares in the company or going public to raise money. Entrepreneurs anticipate changes in their role while business owners largely retain the same function.

Now, you may wonder where you stand.

Well, while not all business owners are entrepreneurs, all entrepreneurs are business owners. Entrepreneurs create ventures and therefore own a business. A startup founder in the tech industry, for example, can identify themselves as both an entrepreneur and business owner. Business owners, on the other hand, are not always entrepreneurs. Running a shop on the corner, for example, does not make the owner an entrepreneur.

Nevertheless, whether you identify as an entrepreneur, a CEO, a business owner, a manager, or even a self-employed professional managing your business, your journey toward building your ideas into a brand that commands attention, delivers performance and wins is easier with aelustre®!

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