Risk and scale.
I started a restaurant, but never considered it a “startup”. It was new to the world, not a chain, and though successful still a small business. It was complicated to figure out but there were a million examples to work from and you start cash flowing rather quickly.
I also have a startup - because they are new products that have not been done before. There are many complicated things to figure out - even with simple products! I agree with Paul O’Brien’s answer although the fail rate for restaurants and startups seem to be nearly the same. Startups often require more money though.
In a startup you work for a long time without making money as you need to prove the product or the concept. If managed correctly, once it takes off you can scale up quickly. With a small business (like a single location restaurant) there is only so much money that can be made. If a small business is unique enough and loved enough, you can franchise it to become larger but it is a different kind of risk/reward.
I would think that for most people in the business World a Startup versus a small business would be thought of often based on the business structure, and goals.
If you are starting a small business you may just be providing existing types of products or services. They may not be using a USP (Unique Selling Position).
After the tech startups that were so big in the 1980s and later many people view a startup as a company with a legal structure that is often more corporate in nature. So not often a LLC (limited liability company) or privately held business. More often than not these businesses are stock-based corporations that intend to raise capital, and at some point sell or offer stocks for investment in their startup.
In the United States as an example, the business might be founded as a C corp or an S corporation for the startup. Also, most startups may start as private companies but be structured legally to go public at some point in the future.
So I would say that the primary difference is the business structure and intent that the founders have in mind when they are starting their business.
Startups are small businesses but with a key difference. While both are often based on great ideas and a powerful ambition, startups thrive in an environment that’s constantly changing. They’re not afraid to take risks, experiment with new technologies and business models, and put everything they have on the line to make their dreams come true.
On the other hand, a small business is one that’s run with integrity and with a dedication to customer service. It’s one that makes a profit but does so with quality and integrity; one that has low employee turnover, high productivity and positive employee relations in the workplace. It takes many years to build a small business (and take it from start-up to small business), but once established, it continues to grow over time.
That’s why startups and small businesses are not as different as they appear at first glance. By understanding the differences between them, you can get the most out of your start-up investments.