Owning a small business usually requires wearing different hats to fulfill different business needs, including entrepreneurship and business management. Both of these roles are often done by the same person, but the skills and mindset for each are fundamentally different.

Most entrepreneurs begin their careers as small-business owners, but not all small-business owners are entrepreneurs. In fact, many entrepreneurs are terrible at managing the day-to-day operations of a business and will hire a professional manager to do those tasks. Similarly, a skilled manager can become a successful business owner by partnering with an entrepreneur or buying a launched business from one.

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In a nutshell, an entrepreneur launches a business and has a vision for its future growth, while a manager is responsible for ensuring that the company's operations run effectively.

How to Differentiate Between Small Business and Entrepreneurship

According to Michael Gerber in his classic book "The E-Myth Revisited," most small businesses begin with an "entrepreneurial seizure" in which someone decides he doesn't want to work for someone else anymore. Soon after he launches his small business, however, he realizes that he is now working for his business instead of the business working for him.

Small-business owners tend to wear three different hats to fill three different roles, which, according to Gerber, are:

  • The entrepreneur: builds the business
  • The manager: runs the business
  • The technician: does the work

Starting a roofing company, for example, would demonstrate your entrepreneurial side, but if you were still hammering shingles, processing invoices and doing your own bookkeeping, you would also be a technician and manager. A true entrepreneur, in Gerber's view, would delegate the technician and manager tasks to others while spending his time and energy building the business or working on the next business opportunity.

Difference Between Entrepreneurship and Business Management

Entrepreneurship begins with an innovative idea for a new business. The entrepreneur then pulls together the required resources to get the business started, like investors and talent. Entrepreneurship can be a relatively short process in company's life cycle, or it can involve modifying and enhancing the business in order to make its products and services more attractive to customers. Entrepreneurship always involves taking risks, and the success or failure of the new business is on the entrepreneur's shoulders.

Business management, on the other hand, is a continuous process of running a business and overseeing the administrative tasks the business requires. While an entrepreneur is almost always the founder and owner of a small business, a manager is often an employee. Business management includes making adjustments to the processes initiated by the entrepreneur to eliminate waste, reduce costs or increase profits.

While entrepreneurship is centralized in the company's founder, business management is decentralized among different departments and in the company's hierarchy, such as vice presidents, directors, managers and supervisors. While entrepreneurship is primarily concerned with sustainable growth, business management is concerned with organizational goals and optimizing the usage of available resources.

Similarities Between Entrepreneurship and Small-Business Ownership

A small business owner isn't always an entrepreneur. However, starting and owning a business does require entrepreneurial qualities. Those qualities don't always have to be in the forefront, but they do have to be there from time to time or the business would never get off the ground, and once launched, it would never grow.

It's important to remember that almost all entrepreneurs start off as small-business owners, whether it's Steve Jobs working from a garage or Mark Zuckerberg working from a dorm room. In fact, at a first glance, it could be difficult to differentiate an emerging entrepreneur from a small-business owner. It's not until you see her progress or find out her vision or her plans for the future that the difference becomes apparent.

If someone buys a restaurant and maintains it for 20 years, that person is probably not an entrepreneur. However, if she expands the business, launches new locations or uses the profits from the restaurant to start new businesses, you are undoubtedly looking at an entrepreneur.