Key Differences Between Entrepreneurs and Small Business Owners

What are the main differences between an entrepreneur and a business owner? In today’s world, the words “entrepreneur” and “business owner” are often used interchangeably (Team ZenBusiness sometimes does that, in fact).

But strictly speaking, there can be some nuance between an entrepreneur and a business owner. To get down to brass tacks, entrepreneurs are future-focused; they’re the founders and creators of new products or services. In contrast, a small business owner starts a business in an industry or sector that already exists in the marketplace. For example, an entrepreneur might create a new piece of equipment that revolutionizes how cosmetologists cut hair. Meanwhile, a business owner might just open a haircutting salon with traditional techniques.

So while an entrepreneur is a type of business owner, not all business owners are entrepreneurs (at least not strictly speaking).

Read on to learn more about the major factors in the entrepreneur vs business owner distinction as defined by their work personalities.

Entrepreneur vs. Business Owner: The Key Differences

Need a litmus test for comparing an entrepreneur and a business owner? Here are ten key distinctions that can help clarify this nuanced difference.

1. Entrepreneurs make money; business owners maintain income

Technically speaking, both entrepreneurs and business owners want to make money; nobody enters business ownership without money-making as a factor in the decision. But the distinction stems from the two roles’ different mindsets. General business owners typically want to generate enough income to support the life they love; maybe that means making enough money through their existing business to support their family, replace their day job, or something similar. They want a consistent income. They want stability.

But an entrepreneur’s priority is making money that they can reinvest in the company and grow the business. They crave forward momentum; they’ve got a big vision for what they want to achieve and the successful business they want to build. They’re driven to expand their brand’s market share.

2. Entrepreneurs have a higher risk tolerance

Entrepreneurs are more likely to take on debt than small business owners and typically have much higher risk tolerance. They are comfortable assuming larger uncertainties and navigating limited resources to pursue new ideas and opportunities. Even if a new business venture has a moderate chance of failing, they’ll still take it on because they believe in their idea.

Entrepreneurs are risk-takers, while small business owners focus on more conservative business practices. Many owners are happy with their current status, so they’re less willing to take risky chances that could fail. For a business owner, the status quo is desirable (or they’d prefer to make small, incremental improvements that aren’t risky).

3. Entrepreneurs enter business ownership for pleasure and profit

Entrepreneurs start their own company because they love the idea of running their own business and don’t want to (or cannot) work for someone else. Most people who become business owners do so because they need to provide financially for themselves and their families. It’s a subtle difference.

Businesses come out of necessity, whereas new ventures are about excitement for new ideas and innovation.

Entrepreneurial types often have a more high-powered personality and exude confidence. Some company owners are less charismatic, but they work hard to keep their company running smoothly rather than taking on new projects.

Entrepreneurs often have higher expectations of themselves and others around them (in the sense that they want to achieve success quickly while also being happy).

4. Business owners focus on long-term success, not short-term success

Business owners generally want to run a successful company that will be profitable in the long term, while entrepreneurs are more focused on short-term success, hoping it will lead to long-term success and a larger company.

Entrepreneurs are risk-takers who jump on the opportunities they see in their immediate situation; they get a big idea, embrace change, and spring into action. Meanwhile, small business owners tend to operate within their comfort zones; granted, they’ll probably find ways to attract more customers to stay ahead of slowdowns, but they won’t take the same big risks as an entrepreneur.

5. Small business owners build communities

An entrepreneur is usually less concerned about what other people think of them than a traditional businessperson would be. Entrepreneurs want to make money with their big idea, maybe even expanding into national or global markets as quickly as possible. When entrepreneurs start new companies, they’re less likely to put down roots in their community because their goal is rapid growth.

Business owners tend to have different goals. Of course, they want to make a living, but money might not be the be-all-end-all factor for them. Maybe they want to create a positive personal reputation in their town, run a nonprofit organization, or build their community by offering jobs. It could be as simple as wanting to create a cozy coffee shop where local artists and performers could highlight their work.

6. Business owners have more reliable access to bank financing

A traditional businessperson has an easier time getting loans from banks than an entrepreneur does, due to their more cautious financial planning skills and realistic projections. Entrepreneurs’ startup funding typically stems from their own capital, investors, business partners, or venture capitalists (check out the Startup Funding guide to learn more). To get financing, most entrepreneurs have to get other entrepreneurial-minded investors to believe in their idea as much as they do.

But business owners can typically approach their bank to ask for a loan. They’re pretty likely to get their desired loan (or a comparable one) because, as an existing company, they have a history of solid financial decisions (and in turn, the bank feels confident they’ll get repaid). Many businesses also have some cash saved up already, or they have resources to offer up as collateral if needed. Entrepreneurs might not have those resources; their best resource is their idea.

Additionally, it’s worth noting that many small business owners avoid securing financing unless they absolutely need it. For example, a business owner might take out a loan to buy a new building or purchase a new piece of equipment to increase their production capacity.

Entrepreneurs are brave risk takers, but business owners have to be financially responsible and think about long-term strategies in order to succeed.

Related: Start a Business or Get a Job?

7. Business owners build teams while entrepreneurs go solo

Smart company owners know they can’t do everything themselves, so they hire others to help. Too many entrepreneurs try to do everything themselves. Entrepreneurs often do not hire employees unless it is absolutely necessary (sometimes to their own detriment), while businesses almost always hire workers.

Entrepreneurs don’t mind taking care of all the details for their company, whereas business owners would rather focus on one or two critical management areas.

Management styles differ as well. Company owners are more likely to use a top-down approach to day-to-day operations, whereas entrepreneurs might be more hands-on. Business proprietors typically have control over their company’s decision-making process and don’t need approval from others before investing capital into new projects or ventures. Entrepreneurs tend not to have this luxury if they funded their startup with investor money, accepted venture capital, or found a lot of business partners.

8. Business owners focus on wise resource allocation

Entrepreneurs work hard at anything and everything that will bring in a profit, while business owners may not want to spend time on some things if it’s not likely to bring in any revenue in a reasonable time period. Business owners build long-term success through consistency and careful planning, including tax strategies, hiring employees, marketing their products, and more.

Business owners and entrepreneurs both make detailed projections of future expenditures and profits. That said, entrepreneurs might have a harder time making accurate projections because they don’t have past sales history. But they’ll still take the risk because there’s potential for a large payoff down the road. If it doesn’t work out, they’ll cut their losses and move on.

9. Entrepreneurs want control, while business owners want stability

Entrepreneurs want to be in control of their company, but most business owners are willing to give up a little control in exchange for stability. Entrepreneurs work for themselves and can make all the decisions on how to run their firm. Meanwhile, many business owners don’t always have control over every decision in their companies; some decisions might need input from partners, landlords, bankers, or even company employees.

Business owners and entrepreneurs certainly both want their company to succeed, but entrepreneurs are more willing to give up on the project if it’s not going well. Business owners can’t easily walk away from what they’ve created and know that giving up is risky because of all the time and money spent.

10. Entrepreneurs are creative, and business owners use known commodities

Entrepreneurs have to be creative with their ideas, while business owners rely on what’s already been done before. Entrepreneurs do something that’s never been done before (or revolutionize the way something’s done), while business owners try to improve upon a known business model.

New business ideas are the lifeblood of any entrepreneur’s business. The ideas they come up with are what set their brand apart from others in the industry, and it can be tough to keep coming up with new ones all the time.

Business owners don’t necessarily need creativity because there is less risk involved if they rely on a product or service that someone else has developed and is already well-known.

Business Owner or Entrepreneur? The Quiz

There’s definitely a bit of a gray area between who’s an entrepreneur and who’s a business owner. Both roles are great, and the same person might switch between the two from time to time. But here are some tests to narrow things down.

An entrepreneur will answer “YES” to these three descriptions:

They’re the one who always thinks up ideas for a new business or project.
They love what they do, and they’re willing to work extra hard to make it happen.
They’re willing to take risks in order to pursue their goals.

A business owner answers “YES” to these three descriptions:

If someone offered to buy out their business, they’d be interested because those funds would give them stability.
They enjoy managing people and have no problem delegating tasks to others.
They have a clear business plan with detailed financial projections.

Both entrepreneurs and business owners get a lot of personal fulfillment out of starting and running a company. And there’s no “right way” to do it; business ownership and entrepreneurship aren’t better or worse when compared side by side. Both have their place, and both can make money.

Entrepreneurship is flashy and exciting, but it’s inherently risky. There’s nothing wrong with sticking to owning a small business and enjoying the stability and fulfillment that provides.

To all the business owners and entrepreneurs reading this: good luck!