Small business is clearly defined as a company, partnership, or individual sole proprietorship which has less than one hundred employees and less than year-round revenue exceeding that of a corporation or normal-sized business. The definition of “little” in regards to being eligible for government assistance and receive preferential tax treatment varies dramatically by industry and country. Many small business owners are not aware of these differences. Often they fall into the trap of thinking government assistance is only for large corporations that have established large offices and have high-level managers. In many ways, this is true, but it also goes without saying for small businesses of all sizes.
There are several reasons why small businesses are often overlooked when it comes to starting a business. Perhaps the biggest reason is lack of funds. Most small businesses come into existence with very little capital. Since capital is king, most small businesses will start small and expand over time. However, this is not always possible since often lenders require a large portion of the business’s equity to be secured before giving any type of financing. Therefore, the potential growth curve for most small businesses is fairly steep.
Also, most government action or regulation requires supervisory changes at every level of a small business from the local level up. This can become costly in terms of personnel, training, and cost over time. Running a small business independently can save thousands of dollars annually in employee wages, benefits, and overhead. Many small business owners choose to operate their business this way because they either cannot afford the ongoing costs of employing employees or cannot locate employees willing to work for less.
Even with no prior business experience, some small business owners seek to operate their businesses in the “old-fashioned” way. They elect to run the business themselves, ignoring any of the complications that come along with operating a sole proprietorship. Unfortunately, running your business as a sole proprietor has many pitfalls, many of which stem from size standards.
One of the pitfalls of owning your own business is that you are responsible for all business decisions. You must be comfortable with this responsibility, and if you are not comfortable with the financial and legal responsibilities of business ownership, it may not be the best option for you. The decision as to what type of business you will run and select characteristics that fit your personality are critical for selecting your own business. A small business should focus on the following characteristics if it is to provide quality customer service: provides information, delivers the goods and services, provides effective staff and management, provides a professional image, avoids needless expenditures, and maintains a reasonable level of success. These are the specific characteristics that a small business needs in order to provide quality customer service.
One of the other pitfalls of running your own business is that you may be responsible for your entire budget. If you are only one person, then you are responsible for all decisions, which can include where to cut corners in order to save money. A small business that is operated as a sole proprietor requires less cost structure because there are fewer employees to split the cost between. In addition, operating as a sole proprietor usually provides more flexibility in the amount of overhead that can be absorbed by the business. In some cases, a small business may operate at a loss due to poor cost allocation.
A small business that is operated as a partnership or limited liability company provides many of the same benefits as a sole proprietor does, but has many of the positive traps that can befall a sole proprietor. The most obvious benefit of operating as a partnership is that the partners share in the losses and expenses of the business, while also being invested in the business through dividends. Limited liability companies are another way to benefit from operating as a partnership. In this case, the owners elect to use their personal assets as partial shares of the company, rather than having all of their assets.
Regardless, of which type of small business you are interested in starting up, it is important that you understand the laws, regulations, and benefits of owning a business. There are many resources available on the Internet to help you understand small business opportunities. It is important that you do a comprehensive search and be willing to ask questions of your chosen small business advisor, as well as reading all the literature on the subject that you are considering. Once you understand the basics, there are many opportunities that allow you to start a business of your own.