Determining Whether a Small Business Has Potential for Growth

Small businesses are privately held companies, partnerships, or sole ownerships that have fewer employees than a normal-sized corporation or business and/or less yearly revenue than a larger business. For these businesses, there are some advantages to be gained by participating in online trading. First, small business sellers need not invest capital in a brick-and-mortar storefront. Through the Internet, these small business sellers can create an online storefront where they can list and sell their products or services. Online trading also allows them to have a reduced over-head compared with a traditional retail establishment. Lastly, online sellers may avoid sales tax since the selling transactions take place through online brokers and payment gateways, thus avoiding state and local taxes.

The following key takeaway will give small business owners additional advantages when it comes to online trading. First, online brokers and payment gateways provide the small business owner with multiple payment options including credit cards, debit cards, e-checks, wire transfers, and online banking. For online sellers, this is a major advantage because it allows them to process credit card payments faster and inexpensively. Another advantage is that sellers are able to maintain their cash flow because payments are carried out automatically through online transaction processing. Lastly, online loan programs allow small business owners to obtain emergency funding when needed, so that business growth is not hampered due to lack of available cash.

The next key takeaway for the small business owner looking to participate in online transactions is whether or not a particular company meets the definition of a small business. When determining whether or not a particular company meets the criteria for small business, the ultimate goal is to determine whether or not the company is profitable. One way to do this is to contact the small business office of the US Small Business Administration (SBA) to obtain information about any small business that meets the SBA’s criteria for small business. Another way is to utilize the services of a qualified financial adviser, small business lawyer, or tax consultant to help determine if a business qualifies as a small business. While the methods mentioned can be effective, they are not comprehensive, and the criteria for small business are constantly evolving.

There are several methods used to determine what size standards apply to a business. The first method of sizing up a small business is to consider the cash flow of the company. Cash flow is a monthly basis, and some businesses generate enough cash throughout the course of the year to meet expenses. Other businesses, however, may have long-term deficits or rely heavily on financing from personal sources, which can result in negative cash flow periods. Many businesses that meet the definition for small business are able to successfully manage short-term cash flows because of their ability to fund themselves on a month-to-month basis.

The second method of sizing up small businesses is to consider the overall health of the company. This means the capacity to produce and distribute goods and services on a consistent basis, as well as the profitability of each product or service sold. It is important to define these terms because some businesses are able to grow rapidly, while others suffer from limited growth opportunities. A comprehensive list of these companies should be researched, but here are some general guidelines that most often define healthy small businesses:

The ability of a small business to attract new customers is a critical factor used to determine its size. Many organizations define “new customer” as a customer who makes a repeat purchase. This definition is usually related to revenue generated from new sales, and it is important to note that customer acquisition costs can significantly reduce a profit margin. A business with no repeat customers is a good candidate for listing under the definition of small business. In addition, there are certain types of small businesses that are exempt from some or all of these requirements, such as franchises. These businesses typically have less involvement with customers and therefore do not need to undergo significant customer acquisition processes.

An important issue related to determining whether a small business has potential for growth relates to cash flow. This term refers to the ability of a small business to sustain itself during periods in which it generates little to no revenue. Cash flow issues are typically associated with long-term contracts, and therefore, should always be a consideration when defining this aspect of the small business. For example, if a company plans to construct a facility that generates a large amount of monthly activity, a good portion of this will need to come from non-recurring revenue, and therefore may not be considered “free cash”, even though revenue may still be generated.

Finally, some business owners mistakenly believe that their location is irrelevant to their level of success. Historically, this was true, at least in the early years of the small business owner. However, as new trends and technologies enter the marketplace, some business owners are finding that their location has become more of a hindrance than a help. Small businesses that are successful are often found in regions that are conducive to growth and development.

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