Small Businesses are privately owned companies, partnerships or individuals with fewer employees and/or fewer annual revenues than regular businesses or companies. Businesses are defined as "small" in terms of being able to apply for government support and are eligible for preferential tax policies vary depending on country and industry. Small businesses range from fifteen employees under the Australian Fair Work Act 2009, fifty employees in accordance with the definitions used by the European Union, and less than five thousand employees, to qualify for many Small Business Administration programs US. While small businesses can also be classified according to other methods, such as annual revenue, shipments, sales, assets, or with annual gross or net income or net income, the number of employees is one of the most widely used measures.
Small businesses in many countries include retail services or operations such as supermarkets, small grocery stores, bakeries or food stores, hairdressers or merchants (eg carpenters, electricians), restaurants, guest houses, photographers, small-scale manufacturing, and Internet-related businesses such as web design and computer programming. Some professionals operate as small businesses, such as lawyers, accountants, dentists, and doctors (although these professionals can also work for large organizations or companies). Small businesses vary greatly in terms of size, income, and regulatory authorization, both within countries and from one country to another. Some small businesses, such as a home accounting business, may only need a business license. On the other hand, other small businesses, such as day care, nursing homes and restaurants serving liquor are more organized, and may require examination and certification of various governmental authorities.
Video Small business
Characteristics
Small or owner-managed business analysts and analysts generally behave as if nominal organizational forms (eg, partnerships, sole traders, or corporations), and the consequent legal and accounting constraints of owner-run companies are consistently meaningful. However, owner-managers often do not describe their behavior according to the implied separation between their personal and business interests. Lenders also often contract the organization's (or company's) borders by seeking personal guarantees or receiving assets held privately as collateral. Because of this behavior, researchers and analysts may want to be cautious in the way they assess the type of organization and implied boundaries in the context relating to the owner-managed company. These include analyzes that use traditional accounting disclosures, and studies that look at companies as defined by some formal organizational structures.
Relationship with entrepreneurship
The term "entrepreneur" is often combined with the term "small business" or used interchangeably with this term. Although most entrepreneurial businesses start as small businesses, not all small businesses are entrepreneurs in the strict sense of the term. Many small businesses are single owner operations that are solely composed of owners, or they have a small number of employees, and many of these small businesses offer existing products, processes, or services, and they do not target growth. In contrast, entrepreneurial ventures offer innovative products, processes or services, and entrepreneurs typically aim to improve the company by adding employees, seeking international sales, and so on, a process financed by venture capital and angel investment. Successful entrepreneurs have the ability to lead the business in a positive direction with proper planning, to adapt to changing environments and understand their own strengths and weaknesses. The tremendous success story comes from a small business growing in growth. Examples are Microsoft, Genentech, and Federal Express that all embody a new business creation sense in small businesses.
Definition of size
The legal definition of "small business" varies by country and by industry. In addition to the number of employees, the methods used to classify small firms include annual sales (turnover), asset values ​​and net income (balance sheet), alone or as a combination of factors.
- In the United States, the Small Business Administration sets industry-standard small business size standards, but generally determines small businesses to have less than five hundred employees for the manufacturing business and less than $ 7.5 million in annual receipts for most non-manufacturing businesses. This definition may vary by circumstance - for example, a small business with fewer than twenty-five full-time employees with an average annual wage below $ 50,000 eligible for tax credits under health care reform legislation Patient Protection and Invite -Use Affordable Care. In comparison, the middle or medium business business has fewer than five hundred employees in the US.
- The European Union generally defines a small business as a business that has less than fifty employees and a turnover or balance sheet of less than EUR10m. but the European Commission is reviewing this definition. For comparison, medium-sized businesses have fewer than 250 employees and a turnover of less than EUR50m. or balance sheet less than EUR43 m.
- In Australia, a small business is defined by the Fair Work Act 2009 as one with fewer than fifteen employees. In comparison, a medium or medium business business has fewer than two hundred employees.
- In South Africa, the National Small Business Amendment Act (Law 26 of 2003) defines business in various ways using the five categories previously set by the National Small Business Act (Act 102 of 1996 ), that is, the standard industry sector and the classification of sub-sectors, class size, equivalent to paid employees, turnover and asset values ​​excluding fixed property.
Small businesses are usually not dominant in the field of operations.
The table below serves as a useful guide to business size nomenclature.
Business size definitions (by number of employees)
- Most cells reflect a size that is not defined in legislation
- Some definitions are multi-parameter, for example, by industry, revenue, or market share
Demographics
In 2016, a surprising demographic of small business owners was published. This study shows that the owners of small US median businesses are over the age of 50 years. Age is distributed as: 51% over 50 years, 33% between ages 35-49, and 16% are under the age of 35 years. for sex: 55% owned by men, 36% by women, and 9% representing equal ownership of men and women. The race: 72% Caucasian, 13.5% are Latin, 6.3% are African American, 6.2% are Asian, and 2% others. As for educational background: 39% have earned a bachelor's degree or higher, 33% have college background, and 28% receive at least a high school diploma.
US census data for 2014 and 2015 show the distribution of female ownership of small businesses by firm size. The data describes the percentage that women have with the number of employees including the owner. The data shows that about 22% of the businesses owned by women have between 100-500 employees, 28% between 20-99 employees, 32% between 5-19 employees, 41% between 2-4 employees and about 51% have 1 employee. This shows that the majority of women who own their own businesses work and run their own businesses.
Franchise business
Franchising is a way for small business owners to benefit from the economies of large corporations (franchisors). McDonald's and Subway are examples of franchising. Small business owners can take advantage of strong brand names and purchasing power from larger companies while maintaining their own investment at affordable prices. However, some franchisees conclude that they suffer the "worst of both worlds" feeling that they are too limited by the company's mandate and have no true independence. This is the assumption that small businesses are just franchisees, but in reality many franchise owners are also small businesses. Although considered a successful way of doing business, the literature has proved that there is a high failure rate in franchising as well, especially in the UK, where research shows of 1658 franchise companies operating in 1984, only 601 were left in 1998, only 36%.
Rescue briefcase
The retail cooperative is a type of cooperative that uses economies of scale on behalf of its retailers. Cooperative retailers use their purchasing power to obtain discounts from manufacturers and often share marketing costs. They are often recognized as "local groups" because they have their own store in the community. It is common for grocery stores, hardware stores, and locally owned pharmacies to participate in retail cooperatives. Ace Hardware, True Value, and NAPA are examples of retail cooperatives. The retail cooperative also allows consumers to supply their own income and gain bargaining power outside the business sector. Retail cooperatives mainly reside in small communities where local businesses are often closed.
Maps Small business
Benefits
Many small businesses can start off at low cost and on a part-time basis, while a person continues a steady job with an employer or provides care for family members at home. In developing countries, many small businesses are single owner operations such as selling products at a market kiosk or preparing hot food for sale on the street, which provides a small income. In the 2000s, small businesses were also suitable for Internet marketing; because, it can easily serve a special niche, something that will be more difficult before the Internet revolution that began in the late 1990s. Internet marketing gives small businesses the ability to market on a smaller budget. Adapting to change is very important in business and especially small business; not tied to the bureaucratic inertia associated with large corporations, small businesses can respond to rapidly changing market demands. Small business owners tend to have personal contacts that are closer to their customers and clients than large companies, because small business owners see their customers privately each week.
One study shows that local small businesses are better for the local economy than the introduction of new chain stores. By opening up new national-level chain stores, profits from local businesses are declining and many businesses end up failing and should be shut down. This creates an exponential effect. When one shop closes, people lose their jobs, other businesses lose business from a failed business, and so on. In many cases, large companies replace as many jobs as they produce.
Independence is another advantage of owning a small business. A small business owner does not need to report to a supervisor or manager. In addition, many people want to make their own decisions, take risks themselves, and reap the rewards of their efforts. Small business owners have the flexibility and freedom to make their own decisions within the constraints imposed by other economic and environmental factors. However, employers have to work for hours and understand that ultimately their customers are their bosses.
Several organizations in the United States also provide assistance to small business sectors, such as Small Business Resources and One Independent Pioneer Resources. Small businesses (often done by family members) adjust faster with changing conditions; however, they are closed to the absorption of new knowledge and hiring new workers from outside.
Challenges
Small businesses often face various problems, some of which are related to their size. The most common cause of bankruptcy is under capitalization. This is often caused by poor planning rather than economic conditions. It is a common "general rule" that employers should have access to a sum of money at least equal to the projected revenue for the first year of business in addition to the anticipated costs. For example, if a prospective owner thinks that he will make $ 100,000 in income in the first year with $ 150,000 in initial fee, then he should be no less than $ 250,000 available. Initial costs are often underestimated and add to the business burden. Failure to provide a funding rate for this company may make the owner liable for all debts of the company if he ends up in a bankruptcy court, under theory under capitalization.
In addition to ensuring that the business has sufficient capital, small business owners must also pay attention to the contribution margin (sales minus variable costs). To break even, a business must be able to reach a sales level where the contribution margin equals fixed costs. When they first started, many small business owners under the price of their products to the point where even at their maximum capacity, it is impossible to break even. Cost control or price increases often solve this problem.
In the United States, some of the biggest concerns of small business owners are the cost of insurance (such as liabilities and health), increases in energy costs, taxes, and tax compliance. In the UK and Australia, small business owners tend to be more concerned with red tape of excessive government.
Contract fraud has become an ongoing problem for small businesses in the United States. Small businesses are legally required to receive a fair share (23 percent) of the total value of all major government contracts as mandated by the Small Business Act of 1953. Since 2002, a series of federal investigations have found fraud, abuse, loophole, and lack of oversight within a small federal business contract, which has led to the transfer of billions of dollars in small business contracts to large corporations.
Another problem for many small businesses is called 'Entrepreneurial Myth' or E-Myth. The mythic assumption is that an expert in a particular technical field will also be expert in doing such a business. Additional business management skills needed to keep the business running smoothly. Some of these misconceptions arise from the failure to distinguish between small business managers as entrepreneurs or capitalists. While almost all small-company managers are required to take on a capitalist role, only a small percentage will act as entrepreneurs. The line between owner-manager and entrepreneur can be determined by whether their business is growth-oriented or not. In general, small business owners primarily focus on survival rather than growing; therefore, does not experience the five stages of the life cycle of a company (birth, growth, maturity, resurrection, and decline) as an entrepreneur does.
Another problem for many small businesses is the much larger business capacity to influence or sometimes determine their chances for success. Business networks and social media have been used as a key tool by small businesses in the UK, but most of them use only a "scalp" approach in a desperate attempt to exploit a less successful market. More than half of small companies do not have a business plan, a tool that is considered one of the most important factors for business success. Business planning is associated with improved growth prospects. Funders and investors usually need a business plan. A plan also serves as a strategic planning document for owners and CEOs, which can be used as a "bible" for decision making
An international trade survey shows that the share of UK exporting businesses increased from 32% in 2012 to 39% by 2013. While this may seem positive, in reality growth is slow, as small business owners shy away from exports due to actual and perceived obstacles. Learning the basics of foreign languages ​​can be a solution to open the door to a new trading market, it is the fact that not all foreign business partners speak English. China declared to grow by 7.6% in 2013 and still unfortunately 95% of business owners who want to export to China have no desire and no knowledge to learn their local language.
Bankruptcy
When a small business fails, the owner can file for bankruptcy. In many cases, this can be handled through personal bankruptcy filings. Corporations can file for bankruptcy, but if the business does not work and valuable company assets are likely to be taken over by a secured creditor, there is little advantage to burdening the bankruptcy company. Many countries offer exceptions to small business assets so they can continue to operate during and after personal bankruptcy. However, company assets are usually not excluded; therefore, it may be more difficult to resume business operations of a legal entity if the owner filed for bankruptcy. Researchers have examined the small business failures in depth, with attempts to model the predictability of failure.
Social responsibility
Small businesses can face several issues related to involvement in corporate social responsibility, because of the inherent characteristics of their size. Small business owners often participate heavily in their day-to-day operations. This resulted in a lack of time for owners to coordinate socially responsible efforts, such as supporting local charitable or nonprofit activities. In addition, the skills of small business owners are often outside the socially responsible practice area, which contributes to a lack of participation. Small businesses also face peer pressure from larger forces in their respective industries, making it difficult to resist and work against industry expectations. Furthermore, small businesses experience stress from shareholder expectations. Since small businesses have more personal relationships with local customers and shareholders, they should also be prepared to withhold closer scrutiny if they are to share the benefits of socially responsible practice.
Work quality
While small businesses employ more than half of the workforce in the US and have been established as the key driving force behind job creation, the quality of work created by this business has been questioned. Small businesses generally hire individuals from the Secondary labor market. As a result, in the US, wages are 49% higher for employees of large companies. In addition, many small businesses are struggling or unable to give employees the benefits to be given to large companies. Research from the US Small Business Administration shows that employees of large corporations are 17% more likely to receive benefits including salary, paid leave, paid holidays, bonuses, insurance, and retirement packages. Both lower wages and fewer benefits are combined to create a job turnover rate among US small businesses that are three times higher than large companies. Employees from small businesses also have to adapt to a higher failure rate than small companies, which means that they are more likely to lose their jobs because the company is under. In the US 69% of small businesses last at least two years, but this percentage drops to 51% for companies that reach five years of operation. The US Small Business Administration counts companies with sales of $ 35.5 million and 1,500 employees as "small businesses", depending on the industry. Outside the government, companies with less than $ 7 million in sales and less than five hundred employees are widely regarded as small businesses.
Cybercrime
Cyber ​​crime in the business world can be broken down into 4 main categories. They include loss of reputation and consumer confidence, the cost of fixing problems, loss of capital and assets, and legal difficulties that can come from this problem. Loss of reputation and consumer confidence can be severely affected after one attack. Many small businesses will struggle to gain trust and trust in their customers after being known to have had problems before. The cost of fixing a cyber attack will require experts outside their field to continue the investigation and find the problem. Down for business means losing money at the same time. This can stop online operations and define potential business to go down for long periods of time. The loss of capital and assets is closely linked to the cost of fixing this problem. During cyber attacks, businesses can lose their funds for the business. Worst case scenario, a business can actually lose all their working capital and funds. The legal difficulties involved with cyber crime can be pricy and hurt the business itself because it does not have standard security standards and standards. Security is not just for business but more importantly the customer should be the number one priority when dealing with security protocols.
The monetary dollar damage caused by cyber crime in 2016 is equivalent to over 1.33 billion dollars in the United States alone. In 2016, California alone has more than 255 million dollars reported to IC3. The average company this year in the United States amounted to 17.36 million dollars in cybercrime attacks. Certain cyber attacks may vary on how long it takes to resolve the problem. It can take up to 69 days for an average daily attack on business. The types of attacks include virus and malware issues. Employee activity in the workspace can also create cyber attacks. Employees who use mobile devices or remote work access from work make it easy for cyber attacks.
Marketing
Although small businesses have a close relationship with existing customers, finding new customers and reaching new markets is a big challenge for small business owners. Small businesses usually find themselves short of time to do marketing, because they have to run aspects of daily business. To create new business streams and discover new clients and customers, they must work to market their business sustainably. Low sales (poor marketing results) is one of the main reasons for small business failures. General marketing techniques for small businesses including business networks (eg, attending Chamber of Commerce events or trade shows), "word of mouth" promotions by existing customers, customer references, Yellow page directories, television, radio, and outdoor advertising (eg, billboard roadside), print ads, and Internet marketing. TV advertising can be very expensive, so it is usually meant to create awareness of a product or service. Another way that small businesses can use to advertise is through the use of "deal of the day" websites like Groupon and Living Social. These Internet transactions encourage customers to patronize small businesses.
Many small business owners find internet marketing more affordable. Google AdWords and Yahoo! Search Marketing are two popular options for getting a small business product or service in front of a motivated web searcher. Social media is also an affordable marketing route for small businesses. This is a fraction of the cost of traditional marketing and small businesses can do it themselves or find a small social marketing agent that they can rent for a small fee. Statistically, social media marketing has a higher rate of acquisition than traditional media. Successful online small business marketers are also adept at leveraging the most relevant keywords in their website content. Ads on niche websites frequented by potential customers can also be effective, but with the long tail of the Internet, it can be an intensive time to advertise on enough websites to get effective reach.
Make business websites more affordable with many do-it-yourself programs now available for beginners. A website can provide significant marketing exposure for small businesses when marketed over the Internet and other channels. Some popular services are WordPress, Joomla Squarespace, Wix, and EXAI. Social media has proven to be very useful in gaining additional exposure for many small businesses. Many small business owners use Facebook and Twitter as a way to reach their loyal customers to give them news about the day's specials or special coupons, generate repeat business and reach new prospective clients. The relational nature of social media, together with its immediate and twenty-four-hour presence, provides intimacy for the relationships that small businesses can have with their customers, while making them more efficient for them to communicate with larger numbers. Facebook advertising is also a very cost-effective way for small business owners to reach targeted audiences with very specific messages. In addition to social networking sites, blogs have become a very effective way for small businesses to position themselves as experts on issues that are important to their customers. This can be done with proprietary blogs and/or by using a back link strategy where marketers comment on other blogs and leave links to the small business website itself. Posting to a blog about a company's business or service area on a regular basis can increase web traffic to a company's website.
Marketing plan
- Market research - To generate marketing plans for small businesses, research should be conducted on the same business, which should include desk research (online or directory) and field research. It provides insight into the behavior of target groups and spending patterns. Analyzing a competitor's marketing strategy makes it easier for small businesses to gain market share.
- Marketing mix - Marketing mix is ​​an important factor for every business to succeed. Especially for small businesses, checking the marketing mix of competitors can be very helpful. An appropriate market mix, which uses different types of marketing, can help increase sales.
- Product lifecycle - After the business launch, an important focal point should be the growth phase (adding customers, adding products or services, and/or expanding into new markets) and working towards the maturity phase. Once the business reaches the maturity stage, an expansion strategy must be done. Relaunching is also an option at this stage. The pricing strategy should be flexible and based on the different stages of the product life cycle.
- Promotional techniques - Preferably to keep promotion costs as low as possible. 'Word of mouth', 'email marketing', 'print ads' in local newspapers, etc. Can be effective.
- Distribution channels - Choosing an effective distribution channel can reduce promotional costs as well as overall expenses for small businesses.
Contributions to the economy
In the US, small businesses (less than five hundred employees) account for more than half of non-agricultural, private GDP and about half private sector employment. Regarding small businesses, the best job providers are those with fewer than ten employees, and those with ten or more but fewer than twenty employees enter as the second, and those who have twenty or more but fewer than one hundred employees enter as third ( Interpolate data from the following references). The latest data shows companies with less than twenty employees account slightly more than 18% of the work.
According to "The Family Business Review," "There are about seventeen million sole proprietorships in the US It can be argued that a sole proprietorship (a non-legal business owned by a single person) is a family business type" and "there are twenty-two million small businesses less than five hundred employees) in the US and about 14,000 large businesses. "Also, it has been found that small businesses create the latest jobs in society," In 1979, David Birch published the first empirical evidence that small companies (less than 100 employees) created jobs the most recent ", and Edmiston claims that" perhaps the greatest generator of interest in entrepreneurship and small business is the widely held belief that small businesses in the United States create the most recent jobs. "Evidence shows that small businesses do create a substantial majority of clean new jobs in an average year. "Local businesses provide competition to each other and also to men ntang giant company. Of 5,369,068 companies employed in 1995, 78.8 percent had fewer than ten employees, and 99.7 percent had fewer than five hundred employees.
Funding source
Small businesses use a variety of resources available for start-up capital:
- Own financing by the owner through cash savings, equity loan at home, and/or other assets
- Loans or financial rewards from friends or relatives
- Grants from private, government, or other sources
- Personal stock issues
- Form a partnership
- Angels' Investors
- Loans from banks, credit unions, or other financial institutions
- SME financing, including venture-based loans and venture capital, is provided with a good business plan
Some small businesses financed further through credit card debt - usually a bad choice, given that interest rates on credit cards are often several times the rate to be paid on credit lines in banks or bank loans. Recent research shows that the use of credit scores in small business loans by community banks is surprisingly widespread. In addition, the scores used tend to be consumer credit scores from small business owners rather than small business credit scores that include data on companies as well as on owners. Many owners look for bank loans on behalf of their business; however, banks will usually demand personal guarantees by business owners.
In the United States, the Small Business Administration (SBA) runs several loan programs that can help secure small business loans. In these programs, the SBA guarantees a portion of the loan to the issuing bank, and thereby, frees the bank from some risks of extending the loan to the small business. SBA also requires business owners to pledge personal assets and sign as personal guarantees for loans. 8 (a) The Business Development Program assists in the development of small businesses owned and operated by African American, Hispanic, and Asian. Canadian small businesses can take advantage of federally-funded programs and services. See Federal funding for small businesses in Canada (grants and loans).
In October 2010, Alejandro Cremades and Tanya Prive established the first equity crowdfunding platform for small businesses in history as an alternative source of financing. The platform operates under the name Rock The Post.
Business networks and advocacy groups
Small businesses often join or join to form organizations to advocate the cause or to achieve economies of scale that benefit large businesses, such as the opportunity to buy cheaper health insurance in large numbers. These organizations include local or regional groups such as the Chamber of Commerce and independent business alliances, as well as national or international specialized industry organizations. Such groups often serve a dual purpose, as business networks provide marketing and connect members to prospective sales leaders and suppliers, as well as advocacy groups, bringing together many small businesses to cast a stronger voice in regional or national politics. In the case of independent business alliances, promoting the value of locally-owned and independent businesses (not necessarily small) through public education campaigns is an integral part of their work.
The largest regional small business group in the United States is the Small Business Council, located in Greater Cleveland. Trade and Investment UK (www.ukti.gov.in) provides research in various markets around the world, as well as research in program planning and promotional activities for exporters. The role of BEXA (British Exporters Association) is to connect new exporters with expert service, it can provide details about regional export contacts, which can be made informally to discuss issues. Trade associations and all major banks can often provide links to international groups in overseas markets, some can also help establish joint ventures, trade shows, etc.
A number of youth organizations, including 4-H, Junior Achievement, and Scouting have specialized interactive programs and training to help young people run their own small business under adult supervision.
See also
References
- Notes
- The work quoted
- Birch, D. (1979). The process of creating tasks. Unpublished Report, Massachusetts Institute of Technology, prepared for the Economic Development Administration of the US Department of Commerce, Washington D.C.
- Birch, David (1987), Creation Jobs in America, How our smallest company puts most people to work, The Free Press, New York
- Edmiston, Kelly (2010). "The Role of Small and Large Businesses in Economic Development". Economic Review . 1 : 1-93.
- Shanker, Melissa Carey, and Joseph H. Astrachan. "Family Business Review." Sage Publication 9.2 (1996): 1-123. Print.
External links
- Business.usa.gov, the official website for business related activities in the US
- Small Business Federation, UK-based resource for small business owners.
Source of the article : Wikipedia
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