Tuesday, December 3, 2013

Startups vs Small Business: Bimotics Perspective

Every once in a while I come across blogs and articles on the difference between startups and small businesses. The distinction between the two is that a successful startup is expected to grow exponentially from small beginnings, to attract customers rapidly, and hopefully grow to serve a very large market.  Startups are therefore a much smaller set of small businesses. In contrast, small businesses typically have a viable business and customer base in place and their needs are slightly different as a result.  Bimotics has been evaluating and analyzing this dynamic and this is reflected in the operational and financial dashboards that Bimotics builds.

My first impression was that the dashboard of a startup and a small business would be the same-- the slope of lines and the amplitude of the y-axis on some of the charts would be able to share the same visualization framework. Is it not true that all businesses should grow?  The trajectory of a startup would just be steeper right? At their essence, don’t all businesses share similar foundational forces of accounting and operations?

While I’m not wrong, Neil Thanedar wrote in a 2012 Forbes article that specific focus of each business type would drive different analytics in a dashboard. He explains that small businesses are driven by profitability and stable long-term value, while startups are focused on top-end revenue and growth potential.  

Profit is basically calculated by subtracting Total Costs from Total Revenue. While Top-end Revenue is calculated by subtracting just Total Discounts and Returns from Total Revenue.

A small business focusing just on top-end revenue would be disastrous as it does not address the need for sustain long-term value. Profitability is a better analytic as it takes in account costs and gives a business owner indication of sustainability. As long as small business is making a profit, it will continue to survive.

Although cost is important when a startup in evaluating available runway, it is not used when focusing on how the business is performing.  Top-end revenue tells the founder what it takes to make sales. Against defined specific sales tactics, the founder evaluates what makes people buy and how to attract more sales. This insight is key for accelerated growth of a startup to capture that larger market potential.

Even amongst businesses of small size, it is important to understand how focus can drive different monitoring and analytical needs.  Although there are business fundamentals that all businesses need to adhere to, at the owner level, dashboards are not one-size fits all.

Bimotics is tailored to suit the needs and unlock the potential of companies from the emerging startup to the growing small and medium sized business.

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