12 Distinctions between Traditional Business vs New age Startups

For a person looking for a job in India, getting into a big traditional business house was the dream until about 8-10 years back. However, of late, India has become the land of opportunity and there are a lot of startups coming up. After the success (scaling up of revenues and operations) of the forebearers – Flipkart, PayTm, Ola, and Swiggy – startups have started coming up in many industries and new graduates and even seasoned professionals have shown eagerness to join these new-age companies.

I myself have worked in a mix of big companies and startups so I am putting down some pointers from my experience that might be helpful for you to decide between the two options for yourselves. Just note that I am not talking about Google, FB, etc when I mention traditional business; these are in a league of their own.

Factors to consider when deciding – Traditional Business vs startups

1. Choice: The foremost parameter is Choice – Do you have 2 or more offers that you can compare amongst? With high unemployment, many people simply don’t have a choice. Hence if you don’t have a choice the decision is made for you.
   
   
2. Culture: If you have a choice, the most important thing that once should think about is culture.
   Generally, what I have observed is that the culture of traditional business is more hierarchal – employees listen and respect fear their bosses and are not immediately put off if there is some scolding. Some even expect it in case of a mistake and believe that something is out of place if their due share is not received.
   In startups, however, the employees generally are younger and less patient about this issue. Employees might even start searching for a job if they think that managers are not treating them well. In many cases, the company policies also discourage this kind of behaviour from managers. One more reason for this is that often in startups the age difference between an employee and their manager might be very less or even reverse of what is expected.
   Now the youth would certainly want the culture in startups so that they can be more open (even friendly) with managers, however, it might be difficult for a seasoned professional to adjust who has the habit of dealing with the iron hand or a colourful tongue.
   
   
3. Pay Scales: Initially, Startups started with a higher pay structure compared to what traditional business houses generally would pay for compensating for the risk of joining a smaller set up with uncertainty in job security (the company itself might shut down). However, over the years the funding improved and thereafter the competition was within startups to get the best talent. Many startups also offer ESOPs for senior-level positions which have made some early employees for the ‘forebearers’ very rich.
   
   
4. Responsibility / Quality of Work / Learning: Since the average age of the employees is much lower in startups, even a young talent can be given a lot of responsibility which might not be even dreamt off in some of the established companies. This is the reason why the quality of work is much better – you are making decisions instead of just executing them at an early stage of the career. The burden of responsibility is a great teacher and therefore the learning that happens is immense. This, in my knowledge one of the biggest reasons why people prefer to work in startups.
   
   
5. Work-Life balance / Quantity of Work: The flip side of the above point is the quantity of work. Most startups are always hustling either for increasing revenue or for decreasing burn and there are intermittent even higher pressure times when due diligence happens within the company for raising funds from outside investors. Everything and everyone is focussed and it’s all hands on deck’ on the situation at that time – because quite frankly there are very few startups that are self-sustaining and funding is what keeps the lights on.
   
   
6. Peer Group: Since startups give good pay packages, the confident (and dare I say comparatively more intelligent) lot – which are not afraid of job losses – often flock to these startups. While the pay packages are high, the benchmarks are also high because they know that it is a high pressure and skill job. Hence the peer group is comparatively better (at least on an average basis). This is another reason why you learn better as Jim Rohn famously said: “You’re the average of the five people you spend the most time with”
   
   
7. Future ambitions of person: Many people want to become entrepreneurs themselves and therefore want to join a startup to understand the ways of working. Others might want to pursue higher studies for which recommendations of respected industry professionals (leading big companies) might be better. In any case, this is also a driving force behind some of the decisions.
   
   
8. Employee Benefits: Startups are known to provide better employee benefits like better pantry services, work from home relaxation, quarterly outings etc. Some benefits may also be provided by the traditional business also. Not a big deal, but does go on to show how much companies value the employee. One of the ideal company to think here would be Google.
   
   
9. Changing Priorities: One of the funny thing about working in a startup is changing priorities. Well, if you think about traditional business houses – what is their no. 1 priority? 99% of the time I can bet it is their bottom line or it would surely be a constraint parameter. In startups this is not the case – there may be times when you are given a free hand to increase revenue, sometimes profit might take centre stage and at other times customer experience might trump over the others. So if you are someone who cannot adjust with changing priorities startup world might not be for you.
   
   
10. Targets vs Actuals: I am in finance so this hits a little closer to home for me. While targets are high in every company, however in startups particularly when money is to be raised some targets might be so overly optimistic that you might not achieve those in the next period also. Hence if you get stressed by seeing higher targets which might not seem achievable – either you won’t thrive in the startup world or you can probably have a stint here and then you can go back to the other side and see rainbows and sunshine.
    
    
11. Relationship with the Founders / Owners and their involvement in day to day – This is something that matters a lot in some companies – both in startups and traditional business houses. However, not all companies on either side are like that. However, when this is prevalent in a startup, this might negate a lot of other good points like responsibility, learning etc. So watch out for these kinds of startups where you might just be busy executing the strategy which the founders seem to favour.
    
    
12. Profitability & Uncertain times – While generally, the source of salary – operating profits or from investors’ pockets, might not impact employees from a financial standpoint; this does start creating a lot of impact in case if things go awry.
    Case in point is the current CoVid situation. While this has hurt both big and small companies equally, however, those startups which were not even profitable earlier hurt badly. The whole basis of their lofty valuations was ‘growth potential’ and future earning potential on the huge ‘future base’ and to fuel that growth they had spent millions of dollars. When these high transaction numbers crashed, so did the future investment probability and the music stopped.
    Mentioning CoVid here because it is an industry-wide phenomenon which everyone can relate to and while the salary cuts and job losses happened in traditional business also, however the point I am trying to make is that this can happen to a startup without a coronavirus pandemic also everyone can now appreciate what happens at that time.

So, if you are someone who is ok with a fast-paced culture, changing goals, want to take more responsibility, is not afraid to work hard, and is confident to face the uncertain situations you should definitely think about joining startups to accelerate your learning pace and earn handsomely along with it. However, if you think that you might burn out or may not fit in the young crowd of know it alls or just don’t want to risk it – you might want to try for a well-established company and rise through the ranks there.

Finally, neither way is clearly superior to the other and most of it depends on the skill, nature, preference, and adjustment capability of the individual. Let me know in the comment what do you think suits you and why? Also, let me know if you think that I have not been just in my comparison and what should I improve upon.

Also Read: 4 Crucial steps to manage personal finances