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Not all new businesses should be called startups

Startup is a popular term in the California business world, so much so that many entrepreneurs and business owners use it to describe almost any new enterprise. But the definition of the term includes factors that are not applicable to all new businesses. A startup is a venture that aims to meet a demand in the marketplace by the development of an innovative service, product, platform or process. Additionally, startups typically have different goals that most small businesses.

Startups are about growing rapidly and getting to the exit. Indeed, one of the biggest parts of any startup is its exit strategy. Startups need a big market, one that will be targeted for market share. When enough market share has been captured, or at some point earlier, the startup will be exited by its owners. The most common exit strategies are acquisitions and IPOs.

Most small businesses, on the other hand, don't need a big market. Nor do they rely upon innovation to make the enterprise work. Most small businesses owners do not begin with the idea of exit in mind; they begin, rather, in an effort to create an enterprise that will lend financial security and provide a benefit to the community.

The distinction is important because much of business strategy, from marketing to finances to legal matters, is different for startups than for most new businesses. Startups are required to make assumptions regarding important matters like pricing, support, distribution and target audiences. Most new businesses have bases for comparison to make these assumptions simpler and more accurate.

An attorney may be able to help California entrepreneurs and business owners to develop successful strategies both before and after they've entered the marketplace. An attorney with experience in business formation and planning might be able to suggest structuring options or offer advice regarding the protection of intellectual property.

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