Small business is simply defined as a business that has fewer employees than the company itself and less total revenue and business ownership than a corporation or other large business. The definition of “Small business” in regards to eligibility for government assistance and qualify for favourable tax treatment varies greatly by industry and country. There are some countries that have extremely generous definitions of what constitutes a small business and these businesses are often the ones that receive the most government support. The UK is an example of this, as small businesses play a large role in the economy and have provided a significant amount of new employment opportunities for young people in recent times.
Most small businesses are family run and many are actually home-based enterprises started from home. There are two types of small businesses – those that are sole proprietors and those that are incorporated. Many people confuse the differences between a sole proprietor and an incorporated business and this can cause difficulties with tax and legal procedures. A sole proprietor is one that is solely responsible for the company’s affairs and does not have any form of representation or accountability with other people or institutions. This type of business is usually considered the most risky and this risk can be mitigated through the use of a nominee CEO or by using limited liability companies.
On the other hand, an incorporated business has various types of entities such as the incorporation of a company, the structuring of an LLC, or the listing of a business on the stock market. Because many small businesses incorporate on the stock market, there are also many small businesses that do not incorporate. Some countries have specific legislation designed to protect small business owners, although in general these laws are more targeted towards international corporations and their highly profitable tax havens.
One of the most common routes into the private sector is an independent business, and this is very common for those who have previous experience in business or finance and want a more stable form of employment. However, many small business owners do not have the experience to run a business independently and are often forced to employ others to help run the business. In some cases, particularly those where the business is small, employing others to help run the business can be extremely profitable. If the business is large however, it may not be feasible to hire employees to run the business. In these situations, hiring an accountant or business partner is often the most sensible option, as they will have the experience necessary to run the business effectively. They can also bring invaluable experience through their previous work experience and on their industry experience.
Another common route into the private sector is to start out working for a larger company as an intern. Internships allow students to gain valuable experience while gaining valuable skills that they can then apply to their future careers. There are many small businesses that employ interns, particularly those which are well known and successful. For small businesses, however, the costs associated with running a small business and maintaining a high level of overhead can often mean that it makes little sense to hire a student to work for them full time if the intern does not produce a profit and the intern does not find it financially viable to continue working for them.
It is well known that owning small businesses requires less financial risk than many other forms of owning a business. This is because most small businesses are only started from scratch and have a much lower capital requirement than many other forms of business. However, it is also true that owning small businesses requires an extremely high level of overhead. It is important to realise that the largest expenses associated with operating a small business are not necessarily the cost of goods sold but the cost of maintaining employees. Employee salaries and benefits add up to a huge amount of overhead costs every year, and it is vital to keep this figure as low as it is nearly impossible to run any business successfully without a proper team of employees.
A third option for small business owners who need to employ additional staff but would like to retain their office’s location is opening a SOHO (small office on the high street) shop. These shops are generally cheaper to run than other types of business operations and it is entirely possible to achieve a very high level of annual revenue by opening a SOHO shop. However, there are still costs associated with operating this type of business and it is essential to keep this figure as low as possible. This is usually achieved by keeping rent as low as possible, taking advantage of postal discounts when applicable, and utilising every means available to you to reduce your operational costs.
A fourth solution for those looking to hire student interns is opening a small business centre. This type of centre is similar in concept to a college or university setting but instead provides an area for small businesses to meet and engage in business relationships. In most cases the owners of these venues take on students as interns in return for a one-off fee. This fee then gets passed on to the business owner in order to reduce their outgoings. The students will typically stay with the small business centre on a part time basis while continuing to do research and assignments throughout their academic year. These venues provide opportunities for young professionals to build new contacts, network with other students, and enhance their writing and communication skills that are vital aspects of their future career.