The creation of Inova Simples, a tax system just for startups, creates this tax and fiscal differentiation between business models.
Therefore, it is easier to prospect companies that are startups or traditional, depending on your type of commercial action. With the CNPJ.biz website, it is possible to list all official companies in Brazil according to their tax regime. This makes it possible to find only startups and prospect with them.
Nowadays, there is a lot of attention paid to the term startup. Companies that present themselves in this way are immediately seen as some kind of high-level technological innovation. As a result, so-called “traditional companies” have lost prestige.
However, if you want to know the main differences between a startup and a traditional company, read this article until the end!
4 differences between a startup and a traditional company
1. Business model
The first of the major differences between a startup and a traditional company is the business model, especially the relationship with the structuring of the company's price, profit and sustainability.
Simply put, a startup has the freedom to act in a way that no traditional company can, which allows it to test certain ideas and marketing concepts to the limit.
For example, imagine a traditional company like a bakery, a supermarket or a marketing agency. If such a company were to lose money for 3 months, it would probably close its doors. After all, there is no reserve capital to pay employees and other issues in this scenario.
So it's no wonder that around 700 thousand businesses closed their doors during the new coronavirus pandemic. Without the prospect of making money, they had to stop operating as there was no margin to survive the crisis.
However, this scenario does not repeat itself with startups. In fact, they can survive for years at a loss and still become successful. A prime example of this is Uber.
The company, responsible for revolutionizing urban transportation worldwide, has been recording constant losses in its business model. To give you an idea, Uber had loss of 8.5 billion dollars in 2019.
In order to survive, a startup’s business model is to focus on very rapid growth. To do this, the company raises funds from investors and “burns” that money in a model of gigantic rapid growth. This is why startups emerge from nowhere and suddenly become market leaders.
So, after they have established themselves at a size that is profitable to maintain, companies reduce their investments to start making a profit.
This difference in business model is only possible because startups are innovative and are creating markets from scratch or completely transforming them. Therefore, they have enormous growth potential, something that is more limited in a traditional company.
2. Organizational environment
Have you ever heard of the “startup environment”? You probably have. After all, it’s a buzzword in the job market, especially in the technology sector.
The idea is that companies that adopt a startup environment are more relaxed, informal and have greater creative possibilities. This is because they invest in a less rigid, more collaborative structure. Even the physical structure feels this, since startup companies tend to invest in recent technologies and concepts, such as having a sleeping space at work, in order to get the most out of employees' creativity and productivity.
A traditional company, on the other hand, has a more rigid and conservative environment. There are fewer leisure options and opportunities to collaborate, and the hierarchy is applied more rigidly. This is because the environment and work model are vital for the company to maintain its profitable structure.
3. Tax regime
An interesting change in recent tax law makes it easier to differentiate between startups and traditional companies in all sorts of ways to get it right. That's why companies invest in different ideas. Not all of them will be successful, but only one of them needs to be successful.
A traditional company, on the other hand, is risk averse. In practice, they cannot afford to suffer significant losses, as this could lead to bankruptcy within a month or two.
4. Relationship with risk
One of the main differences between a startup and a traditional company is the relationship between these businesses and risk. For the former, risk is a basic ingredient of market activity, while the latter tends to always avoid it.
For a startup, you need to take risks If you want to be an entrepreneur, then you need to know the main differences between a startup and a traditional company. After all, their business models are different and you may end up choosing one over the other.
These are the main differences between a startup and a traditional company. As you can see, there is no right or wrong model, only formats that favor certain contexts.
So, did you like the content? Comment below saying which model is your favorite!
