A business is any entity that earns a profit by engaging in a particular activity or providing a service to others. In business, the term “enterprise” refers to a group of people, a company, an institution, a government or anyone acting for or providing to another. Small businesses are basically privately owned, unincorporated, partnership, or singularly owned corporations, which have less employees and/or lesser gross annual sales than a large-scale corporation or business. Although small business has come under fire from some commentators as a symbol of instability and even demise of the American economy, small business throughout the country is thriving while most large businesses are struggling.
A business’ debt-to-income ratio, also known as the Debt-to-Capacity Ratio (DCO) indicates how much debt a business needs in order to operate at a level that allows it to pay its regular obligations. The higher the debt-to-capability ratio, the more potential the business has to run into financial trouble or even default on its obligations. For a small business, the debt-to-capability ratio is one of two major indicators used by analysts and investors to determine the health of the business and its potential for growth and success. The other indicator, which some analysts consider more important, is the overall debt-to-income ratio, or the ability of the business to generate an income sufficient to cover its costs and debts.
Many small businesses, especially start-ups, cannot afford to have a high overhead expenses. Because overhead expenses can be expensive, many small businesses must choose between running a profitable business or having minimal overhead expenses. To help determine if a business has a high overhead or a low overhead or a combination of both, business owners may consider using indirect costs or indirect taxes. Indirect costs include certain business expenses, such as supplies, materials, utilities, and advertising, that are not necessarily part of the sale or purchase of products and services but are related to the business and its operation.
One of the reasons why small businesses may have slow sales is because of the cost of overhead expenses. Business owners should also understand that in order to maintain and grow a successful business, it must continually reinvest in its operations and growth. Business expenses, such as supplies, materials, labor, advertising, and utilities, must be reinvested to grow, increase profits, and attract new clients and customers. These expenses must be included in the business’s budget to keep the business solvent.
A successful small business, like most other types of small businesses, will have fewer employees than larger businesses. Although starting with only one employee can create problems when the business begins to grow, as the business becomes established and begins to offer better products and services, there will be fewer employees. However, a business that is just starting will always have staff. The company will need staff in order to do customer service, respond to phone calls, deliver products and services, process payments, and operate the business. Staff members may include a receptionist, a bookkeeper, an accountant, a salesman, marketing and advertising staff, and a customer service representative.
Because they are low overhead and create few employees, businesses that have a low demand for employees will have a smaller startup capital requirement and will be able to finance their operations more easily. They will also be able to focus their attention on developing creative marketing campaigns, finding new customers, and increasing sales. In addition, they will not have to spend their money on advertising because their primary expenses will come from a limited customer base.
Low-cost businesses may be based in a city, state, or country where property maintenance and upkeep are required. A business in these areas will usually have very low overhead and a very low property maintenance budget. Because they do not require many employees, these businesses can afford to charge competitive prices for necessary supplies, equipment, and facilities. Because businesses in these areas will be able to provide basic facilities like a power plant and water treatment facility, they will not have to charge for these items. For instance, if a business owner wishes to install a septic system, he or she will not need to pay for labor and materials as the cost will already be included in the original purchase agreement.
The government has a page dedicated to helping small business owners start up. The Small Business Administration also has a page that details several different rules and regulations that apply to owning and operating a small business. All of these resources are intended to help guide small business owners through the process of starting their own business. While small business may not be as widely advertised, there is no reason why it should not be just as accessible and welcoming. If a small business owner takes the time to learn about the business side of things before jumping in, he or she will be assured that they made the best possible choice for themselves and their company.