A small business may be defined as a business with a small number of employees. A business (also called firm or an enterprise) is a legally recognized organizational entity designed to provide goods and/or services to Employment is a Contract between two parties, one being the employer and the other being the employee. The legal definition of "small" often varies by country and industry, but is generally under 100 employees in the United States while under 50 employees in the European Union (In comparison, the American definition of mid-sized business by the number of employees is generally under 500 while 250 is for that of European Union). Employment is a Contract between two parties, one being the employer and the other being the employee. The United States of America —commonly referred to as the Employment is a Contract between two parties, one being the employer and the other being the employee. The European Union ( EU) is a political and economic union of twenty-seven member states, located primarily in The United States of America —commonly referred to as the Employment is a Contract between two parties, one being the employer and the other being the employee. The European Union ( EU) is a political and economic union of twenty-seven member states, located primarily in These businesses are normally privately owned corporations, partnerships, or sole proprietorships. A corporation is a separate legal entity usually used to conduct business For partnership in cricket terminology see List of cricket terms A partnership is a type of Business entity in which partners A sole proprietorship, or simply proprietorship ( Benjamen Clark In Australia, small business is defined as 1-19 employees and medium businesses are made up of 20-200 employees.
However, other methods are also used to classify small companies, such us annual sales (turnover), assets value or net profit (balance sheet), alone or in a mixed definition. These criteria are followed by the European Union, for instance (headcount, turnover and balance sheet totals).
Small businesses are common in many countries, depending on the economic system in operation. Typical examples include: convenience stores, other small shops (such as a bakery or delicatessen), hairdressers, tradesmen, solicitors, lawyers, accountants, restaurants, guest houses, photographers, small-scale manufacturing etc. A convenience store is a small store or shop. They are often located alongside busy roads or at gas/petrol stations. A bakery (also called baker's or bakehouse) is an establishment which produces or/and sells Bread, pies pastries Cakes Biscuits Delicatessen is a term meaning "delicacies" or "fine foods" Cosmetology (from Greek grc κοσμητικός kosmētikos, "skilled in adornment" and grc -λογία -logia) is the study This article is about the skilled manual worker meaning of the term for other uses see Tradesperson (disambiguation A tradesman is a skilled manual worker A "solicitor" is a term used in many Common law jurisdictions for a lawyer who offers legal services outside of the courts A lawyer, according to Black's Law Dictionary, is "a person learned in the law as an attorney, Counsel or Solicitor; a person An accountant is a practitioner of Accountancy, which is the measurement disclosure or provision of assurance about financial information that helps managers investors A restaurant is a retail establishment that serves prepared Food to Customers. Entering dictionaries after World War II, the word motel, a Portmanteau of motor and hotel or motorists' hotel, referred A photographer is a person who takes a Photograph using a Camera. Manufacturing (from Latin manu factura, "making by hand" is the use of tools and labor to make things for use or sale Small businesses are usually independent. In Business, an independent business as a term of distinction generally refers to privately-owned companies (as opposed to those companies owned publicly through a distribution
The smallest businesses, often located in private homes, are called microbusinesses (term used by international organizations such as the World Bank and the International Finance Corporation) or SoHos. The World Bank is an internationally supported Bank that provides financial and technical assistance to developing countries for development programs (e The International Finance Corporation (IFC promotes sustainable private sector investment in developing countries as a way to reduce poverty and improve people's lives The term "mom and pop business" is a common colloquial expression for a single-family operated business with few (or no) employees other than the owners. When judged by the number of employees, the American and the European definitions are the same: under 10 employees. The United States of America —commonly referred to as the Employment is a Contract between two parties, one being the employer and the other being the employee.
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Advantages of small business
A small business can be started at a very low cost and on a part-time basis. Small business is also well suited to internet marketing because it can be very manageable to serve a niche, something that would have been more difficult prior to the internet revolution which began in the late 1990s. The Internet is a global system of interconnected Computer networks In popular usage "marketing" is the promotion of products especially Advertising and Branding However in professional usage the term has a wider meaning of The 1990s collectively refers to the years between and including 1990 and 1999
Adapting to change is crucial in business and particularly small business; not being tied to any bureaucratic inertia, it is typically easier to respond to the marketplace quickly. Bureaucracy is the structure and set of regulations in place to control activity usually in large organizations and government Small business proprietors tend to be intimate with their customers and clients resulting in greater accountability and responsiveness.
Several organizations also provide help for the small business, like Internal Revenue Service in Small Business and Self-Employed One-Stop Resource. [1]
Problems faced by small businesses
Small businesses often face a variety of problems related to their size. A frequent cause of bankruptcy is undercapitalization. Bankruptcy is a legally declared inability or impairment of ability of an individual or organization to pay their Creditors Creditors may file a bankruptcy petition against Undercapitalization refers to any situation where a Business cannot acquire the funds they need This is often a result of poor planning rather than economic conditions[2] - it is common rule of thumb that the entrepreneur should have access to a sum of money at least equal to the projected revenue for the first year of business in addition to his anticipated expenses. An entrepreneur is a person who has possession over a company enterprise, or Venture, and assumes significant accountability for the inherent risks and the outcome For example, if the prospective owner thinks that he will generate $100,000 in revenues in the first year with $150,000 in start-up expenses, then he should have no less than $250,000 available. Failure to provide this level of funding for the company could leave the owner liable for all of the company's debt should he end up in bankruptcy court, under the theory of undercapitalization. A court is a forum used by a power base to adjudicate disputes and dispense civil, labour administrative and criminal Justice under its Undercapitalization refers to any situation where a Business cannot acquire the funds they need
In addition to ensuring that the business has enough capital, the small business owner must also be mindful of gross margin (sales minus variable costs). Gross margin, Gross profit margin or Gross Profit Rate can be defined as the amount of contribution to the business enterprise after paying for direct-fixed and direct-variable Variable costs are expenses that change in proportion to the activity of a business To break even, the business must be able to reach a level of sales where the gross margin exceeds fixed costs. Fixed costs are business Expenses that are not dependent on the level of production or sales When they first start out, many small business owners underprice their products to a point where even at their maximum capacity, it would be impossible to break even. The good news is that cost controls or a price increase can often resolve this problem. Cost Management is the process whereby companies use Cost accounting to report or control the various costs of doing business
In the United States, some of the largest concerns of small business owners are insurance costs (such as liability and health), rising energy costs and taxes. The United States of America —commonly referred to as the Insurance, in Law and Economics, is a form of Risk management primarily used to hedge against the Risk of a contingent loss The term health insurance is generally used to describe a form of Insurance that pays for medical expenses Petroleum ( L petroleum, from Greek πετρέλαιον, lit In the United Kingdom and Australia, small business owners tend to be more concerned with excessive governmental red tape. The United Kingdom of Great Britain and Northern Ireland, commonly known as the United Kingdom, the UK or Britain,is a Sovereign state located For a topic outline on this subject see List of basic Australia topics. " Red tape " is a derisive term for excessive Regulation or rigid conformity to formal rules that is considered redundant or bureaucratic and hinders or prevents
Another problem for many small businesses is termed the 'Entrepreneurial Myth' or E-Myth. E-Myth in the business Vernacular refers to the Entrepreneurial Myth and refers to the fact that most businesses fail because the founders are Technicians The mythic assumption is that an expert in a given technical field will also be expert at running that kind of business. Additional business management skills are needed to keep a business running smoothly.
Marketing the small business
Common marketing techniques for small business include networking, word of mouth, customer referrals, yellow pages directories, television, radio, outdoor (roadside billboards), print and internet. Electronic media like TV can be quite expensive and is normally intended to create awareness of a product or service.
Many small business owners find internet marketing more affordable. Google AdWords and Yahoo! Search Marketing are two popular options of getting small business products or services in front of motivated Web searchers. AdWords is Google 's flagship advertising product and main source of revenue ($16 Yahoo! Search Marketing is a keyword-based " Pay per click " or " Sponsored search " Internet advertising service provided by Yahoo!. Advertising on niche sites can also be effective, but with the long tail of the internet, it can be time intensive to advertise on enough sites to garner an effective reach. A niche market is a focused targetable portion (subset of a market In the application of statistics to Advertising and media analysis reach is defined as the size of the audience who listen to read view or otherwise access a particular work
Franchise businesses
Franchising is a way for small business owners to benefit from the economies of scale of the big corporation (franchisor). Franchising refers to the methods of practicing and using another person's Philosophy of business. McDonald's restaurants are an example of a franchise. The small business owner can leverage a strong brand name and purchasing power of the larger company while keeping their own investment affordable. However, some franchisees conclude that they suffer the "worst of both worlds" feeling they are too restricted by corporate mandates and lack true independence.
Mom and pop small businesses
In North American English small or micro businesses that are family-owned and family-operated may be termed Mom and Pop businesses. People who speak of mom and pop businesses often refer to the unique perspective offered by patronizing a family business. Some encourage the unknown experience of entering a mom and pop establishment over patronizing franchise businesses, which typically offer comparable stores and similar consumer experiences, regardless of location. For example, mom and pop businesses are often highlighted in travel guides, because patronizing a family-owned and operated business allows a traveler to more fully experience and understand the people of another culture.
Small business bankruptcy
When small business fails, the owner may file bankruptcy. In most cases this can be handled through a personal bankruptcy filing. Corporations can file bankruptcy, but if it is out of business and valuable corporate assets are likely to be repossessed by secured creditors there is little advantage to going to the expense of a corporate bankruptcy. Many states offer exemptions for small business assets so they can continue to operate during and after personal bankruptcy. However, corporate assets are normally not exempt, hence it may be more difficult to continue operating an incorporated business if the owner files bankruptcy.
Certification and trust
Building trust with new customers can be a difficult task for a new and establishing business. Some organizations like the Better Business Bureau and the International Charter now offer Small Business Certification, which certifies the quality of the services and goods produced and can encourage new and larger customers. The Better Business Bureau (BBB, founded in 1912 is an organization based in the United States and Canada. Overview Certifications are earned from a Professional society and in general must be renewed periodically or may be valid for a specific period of time (e These services may require a few hours of work, but a certification may reassure potential customers. However, the most effective way to earn trust is through customer referrals.
Contribution to the economy
Small Businesses are the major job providers in most economies. The top job provider is those with less than 10 employees, and those with 10 or more but less than 20 employees comes in as the second, and those with 20 or more but less than 50 employees comes in as the third. Employment is a Contract between two parties, one being the employer and the other being the employee. Employment is a Contract between two parties, one being the employer and the other being the employee. Employment is a Contract between two parties, one being the employer and the other being the employee.
Sources of funding
Small businesses use several sources available for start-up capital:
- Self-financing by the owner through Cash, equity loan on his or her home, and or other assets. Financial capital is money used by Entrepreneurs and Businesses to buy what they need to make their products or provide their services In accounting terms after all liabilities are paid ownership equity is the remaining interest in Assets If valuations placed on assets do not exceed liabilities A loan is a type of Debt. This article focuses exclusively on monetary loans although in practice any material object might be lent
- Loans from friends or relatives
- Private stock issue
- Forming partnerships
- Angel Investors
- SME finance, including Collateral based lending and Venture capital, given sufficiently sound business venture plans
Some small businesses are further financed through credit card debt - usually a poor choice, given that the interest rate on credit cards is often several times the rate that would be paid on a line of credit or bank loan. Software for Fixed assets management and Stock control developed in 2004. For partnership in cricket terminology see List of cricket terms A partnership is a type of Business entity in which partners An angel investor or angel (known as a business angel or informal investor in Europe) is an affluent individual who provides capital for a business Introduction Funding small and medium-sized enterprises is a major function of the general business finance market – in which capital for firms of types is supplied acquired and Venture capital (also known as VC or Venture) is a type of Private equity capital typically provided to immature high-potential growth companies A credit card is part of a system of Payments named after the small Plastic card issued to users of the system A banker or bank is a Financial institution whose primary activity is to act as a payment agent for customers and to borrow and lend money A loan is a type of Debt. This article focuses exclusively on monetary loans although in practice any material object might be lent Many owners seek a bank loan in the name of their business, however banks will usually insist on a personal guarantee by the business owner. In the United States, the Small Business Administration (SBA) runs several loan programs that may help a small business secure loans. The United States of America —commonly referred to as the The Small Business Administration ( SBA) is a United States government agency that provides support to Small businesses. In these programs, the SBA guarantees a portion of the loan to the issuing bank and thus relieves the bank of some of the risk of extending the loan to a small business. The SBA also requires business owners to pledge personal assets and sign as a personal guarantee for the loan.
Canadian small businesses can take advantage of federally funded programs and services. See Federal financing for small businesses in Canada (grants and loans). The Federal Government of Canada funds a number of programs and agencies that provide or facilitate financing for Small businesses Financing is available in the form of grants (sometimes
International differences
The challenges facing small business owners vary from country to country, based on the overall business climate as well as the regulatory framework of each geographic location. It is extremely important for business owners to understand the legal requirements and obligations in their particular country of operation.
See also
- American Independent Business Alliance
- Federation of Small Businesses
- Independent telephone company
- National Federation of Independent Business
- Small Business Administration
- Small start units
- Big Business
- Big-box store
References
The American Independent Business Alliance ( AMIBA) is a non-profit organization that represents the interests of local Independent businesses It helps communities The Federation of Small Businesses (FSB was formed in 1974 and is the UK's leading business organisation representing small and medium businesses An Independent telephone company in the United States was a telephone company providing local service which was not part of the Bell system group of companies "Ma The National Federation of Independent Business (NFIB is a lobbying organization with offices in Washington D The Small Business Administration ( SBA) is a United States government agency that provides support to Small businesses. The word Small Start Unit (also called small start-up or SSU emerged as a business term to address small entities that are going to launch a specific Business model in the Big Business or big business is a term used to describe large corporations in either an individual or collective sense Big-box store is a term that refers to a style of physically large Chain store, and by extension to the company behind the storeDapyx Software network: MP3 Explorer | Ebook Manager | Zenithic