81% of today’s leaders feel optimistic about the future, according to our latest Small and Medium Business Trends Report. It shows that success takes many forms — from high-growth startups to steady, community-driven businesses. But when it comes to choosing between a startup vs a small and medium-sized business (SMB), the decision impacts everything from funding strategies to daily operations.
Some founders grow their businesses steadily with their own money, while others raise funds from investors to scale quickly. Understanding these different business models will help you align your strategy with your goals, resources, and market opportunities. We’ll explore what sets startups and SMBs apart to help you choose the right path. Let’s dive in.
What you’ll learn:
Startups vs. SMBs: Definitions and characteristics
Startups and SMBs take different approaches to growth, operations, and success. While no two businesses are the same, recognizing these common patterns can help with daily decisions and long-term planning. Some businesses blend elements from both models and others shift their approach as market opportunities evolve. Let’s start with startups.
What is a startup?
A startup is a young company built to scale rapidly by using innovation to solve a problem in a unique way or create a new market. Startups prioritize rapid growth and often seek investment to help them expand. They typically start with a small team with limited resources and focus on refining their product or service to achieve market fit. The goal is to survive and scale efficiently, often through technology or disruptive business models.
The term “startup” was first used in a 1976 Forbes article to describe the unfashionable practice of investing in electronic data processing startups. The term became popular in the 1990s and early 2000s as the tech industry expanded rapidly.
Unlike traditional businesses, startups prioritize rapid growth over stability. Many use technology and innovation to disrupt existing industries. For example, Airbnb started as a simple idea for renting air mattresses and grew into a company that changed how people think about travel accommodations. Startups commonly focus on:
- Innovation through new technologies and market approaches
- Scaling quickly to capture large or global markets
- Pursuing rapid growth backed by venture capital and investor funding
- Testing and adapting quickly based on market feedback
What is an SMB?
A small and medium-sized business (SMB) is a company that operates with fewer employees (1 – 20 for small and 21 – 100 for medium-sized) and lower revenue than large corporations. SMBs exist in every industry and can be independently owned or family-run. Unlike startups that aim for rapid growth, SMBs focus on steady, sustainable expansion while serving their customers and communities.
Many entrepreneurs start a small business to serve specific community needs or address a niche market demand. For example, a local bakery that specializes in gluten-free and organic products caters to a growing demand for healthier food options. While some SMBs grow into larger enterprises, many remain small by choice. Our research shows that 62% of these businesses achieved revenue growth exceeding 5% in the past year. SMBs commonly focus on:
- Building sustainable revenue from early stages
- Serving specific market needs or communities
- Growing based on proven demand and capabilities
- Maintaining control over their business direction
Difference in funding and financials for startups vs. SMBs
A key distinction between startups and SMBs is in how they approach funding and financial management. Startups often chase rapid growth with external investments while SMBs prioritize steady, self-sustained operations. These contrasting approaches shape not only how they secure capital, but also how they plan for long-term success.
Startup funding
Most startups need big money fast. A tech startup looking to build the next big app might land $2 million from venture capitalists to hire developers and launch marketing campaigns. Another might turn to Kickstarter or GoFundMe, raising funds while proving people actually want their product.
The tricky part is managing money when you’re not making much yet. Take a biotech startup developing a new drug. They’ll burn through cash for years on research before seeing a dime in revenue. That’s why startups obsess over their “burn rate” (monthly spending) and “runway” (how long until the money runs out).
SMB funding
Small businesses stick to more traditional funding. Many SMB owners start their businesses using their own personal savings, which is often the most straightforward and least risky method as it doesn’t involve external debt or equity.
Traditional bank loans are another common funding source. This includes lines of credit, term loans, and small business loans. Some SMBs may seek funding from angel investors, who are high-net-worth individuals. They provide capital in exchange for ownership equity or convertible debt. Crowdfunding platforms can be useful for raising small amounts of money as well. And of course, borrowing from friends and family is a popular option, especially in the early stages of business.
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How growth and scalability differ for startups and SMBs
Startups and SMBs approach growth based on their business goals and market opportunities. Understanding these different strategies helps you make smart decisions about your growth plans.
Startups
Many startups aim for rapid market growth. A mobile app company launching in San Francisco might require quick user acquisition across multiple cities to become profitable. They’ll invest heavily in digital marketing. Build remote teams. And iterate quickly based on user data. Most successful startups design for scale from early stages. A business to business (B2B) software platform starting with 10 enterprise clients builds its infrastructure anticipating 1,000 clients by:
- Creating systems that automate core processes
- Developing products that work across different markets
- Building flexible teams that can expand quickly
- Focusing on repeatable, scalable sales processes
SMBs
Small businesses often balance growth with stability. A popular food truck might add a second truck after proving the concept works, and maybe eventually open a permanent location. Others might start with a digital storefront and expand into online sales. Many SMBs succeed through focused expansion by:
- Introducing new products to existing customers
- Adding services based on proven demand
- Strengthening their position in core markets
- Growing when profits and logistics allow
Technology investments are reshaping how businesses operate. Our research shows 76% of SMBs increased their tech spending last year, but choosing the right tools depends on your specific needs. The right tools can make your work easier and your customers happier. If you’re a startup or an SMB, investing in it helps you save time and grow efficiently. Here are six must-have tools to get started.
1. Customer relationship management (CRM) tool
Data is one of your most valuable assets. A customer relationship management (CRM) ensures you collect, organize, and use it effectively. It also makes you ready to utilize artificial intelligence (AI) to its full potential. A CRM for startups can capture leads early and ensure nothing gets lost as they scale. SMBs can rely on it to maintain strong relationships and improve repeat business.
With tools like Starter Suite, you can quickly organize data and manage customer relationships. The best part? It enables you to create a system that helps AI work for you.
2. Marketing automation tool
Marketing automation tools help you nurture leads without spending hours on manual tasks. You can set up automated email sequences and run campaigns with ease. In fact, with the help of AI, you can send personalized messages that increase conversions. Startups need it to build brand awareness without hiring a large team, while SMBs can use it to maintain consistent engagement with customers.
3. Sales enablement software
The right sales tools help you keep deals moving and close them faster. Sales enablement software makes it easy to track leads and follow up on opportunities. Simple reports and insights show what’s working and where to focus. They help you make better decisions without digging through data. With the right tools, you can spend less time on admin work and more time growing your business.
4. Customer support platform
Fast, reliable customer support keeps your business running smoothly and your customers happy. With the right tools, you can give customers easy ways to reach you and handle questions quickly. Simple automation (like AI chatbots and case tracking) helps you stay organized without adding extra work. This means less stress for you and better service for your customers.
5. Ecommerce and payment processing
Selling online should be simple. With ecommerce tools, you can quickly set up a digital storefront. You can showcase your products and start selling without any technical hassle. You can even track sales and see what’s working with clear insights. Customers can pay smoothly, whether on your website or through a payment link. Everything stays organized in one place, so it becomes easier to boost your sales.
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6. Team collaboration tool
Clear communication helps your team work faster and stay productive. Tools like Slack keep conversations and files in one place. Everyone stays on the same page without long email threads. Quick messaging and organized channels reduce delays. This makes it easier to collaborate and move projects forward. With fewer distractions and better teamwork, your business can get more done in less time.
The good thing is that you don’t need separate tools for everything. An AI-powered CRM brings everything together — managing customers, automating marketing, streamlining sales, and handling support — all in one place. Instead of switching between different platforms, you get a single system that grows with you. This makes your day-to-day work easier and more efficient.
Many small businesses face challenges with disconnected tools. It’s not uncommon for SMBs to rely on up to seven different tools for sales tracking, customer service, accounting, and other tasks. This creates inefficiencies as you grow. Managing multiple systems can lead to wasted time, duplicated work, and avoidable errors. Here’s how you can choose tools that solve your biggest challenges and scale with your business:
Start with your pain points
Focus on solving the biggest challenges first. If your marketing team struggles to manage leads, a small business CRM can help track interactions and automate follow-ups. If your service team is overwhelmed with support requests, a case management system can speed up response times and improve customer satisfaction. Choosing the right tools for your biggest problems will have the most impact.
Connect your data
Manually transferring data between systems wastes time and increases errors. For example, connecting your email marketing platform with your CRM helps you automatically sync new leads. This helps sales teams to follow up without extra steps. When tools work together, your business runs more smoothly.
Integrate with AI
AI makes business tools smarter and more efficient. In sales, AI can identify high-priority leads and suggest the next best actions. In customer service, it can handle common questions, reducing response times and freeing up your team. Solutions like Agentforce take AI a step further. It uses autonomous AI agents that don’t just assist but actively complete tasks for you (like following up with leads or resolving customer issues). The right AI features help you save time and help you keep up with customer needs.
Prioritize mobile access
Your team needs access to important tools wherever they work. Sales reps on the go can use a mobile CRM to check customer details before meetings, while service agents can respond to urgent cases from anywhere. A mobile-friendly setup keeps your business moving, no matter where your team is.
Lock down your data
With 41% of SMBs citing security as their top tech concern, protecting customer data is critical. Look for tools with strong security features like encrypted data and regular updates. For example, an ecommerce business needs a secure payment system to protect customer transactions and prevent fraud.
Plan for the future
Businesses often outgrow basic tools quickly. Instead of starting with software that only meets immediate needs, look for platforms that offer scalability. For example, a small business might start with a basic CRM to keep track of customers and conversations. As it grows, it may need advanced features like automated follow-ups and AI-driven insights to close deals faster. Choosing flexible tools now can save you from switching later.
Startups vs. SMBs: Two business models, endless opportunities
Startups and SMBs represent different approaches to entrepreneurship. The right business model depends on your unique goals. Regardless of your path, the key to success lies in understanding your individual business needs and using the right tools (or tool!).
Unified platforms like Salesforce for small business help you avoid the complexity of managing multiple disconnected tools. This means spending less time managing technology and more time growing the business. It is an all-in-one CRM that brings together your data across sales, marketing, customer service, and online store. It’s easy to use and quick to set up, so you can start seeing results from day one.
Start your journey with the Starter Suite today. Looking for more customization? Explore Pro Suite. Already a Salesforce customer? Activate Foundations and try out Agentforce today.
AI supported the writers and editors of this article.
