A small business may not be as small as you may think for it has a great impact in the economy. As a matter of fact, it is a major employment provider in many countries. It is named such merely for its size having fewer employees, smaller establishments, and lesser capital to start with. It may be a sole proprietorship, a partnership, or even a corporation. America, Europe, Asia, and Australia require different number of employees or amount of gross income to characterize a small business. America for example generally defines a business small if it has less than a hundred workers.
With lower capital requirement, it is not a wonder that small businesses are widespread. They are privately owned by individuals or families (“mom and pop business”) who are not necessarily big names in the business world but have earned names for themselves in their communities by providing jobs all because of venturing into their business. Examples of these businesses are cafeterias, convenience stores, bakeries, barber shops, and small manufacturing firms. Common sources of capital may be the owners’ savings or other assets and loans from friends and relatives. There are also loan programs that are aimed to help small entrepreneurs.
Aside that you only need low cost to start with small business, it is also easy to manage and control. It will not be difficult for you as the owner to communicate with your employees and vice versa. With such proximity, you can expect a more responsive and responsible team. Bureaucracy which is a common problem in larger companies will not be a problem in smaller organizations since it would not be necessary to divide your workforce into many departments. Thus, there is smoother and faster flow of transactions.
On the other hand, while there are good things with small businesses, they also have their disadvantages pertaining primarily to its size. They are susceptible to bankruptcy considering that owners of small firms rely more on their own income with rather few other sources of capital. One wrong move in planning and running the business may detrimental to the business because the business could not easily get back in track especially because of financial constraints. The owner can choose to secure loans but not many creditors may trust a small time organization.
To prevent this from happening from your venture, you would have to rely on your managing skills from the very start. You have to make sure that your capital can sustain your business by setting a goal and that is to reach a level of revenue that can give a gross margin that will exceed the fixed cost. This can be done by not setting a low selling price just to introduce a product, else your sales will not sustain your production. Be in control with your cost control.
So now do you imagine yourself go big time with small business? You will not only earn income for yourself for less and provide jobs for people in your community but yes, help the economy. Sounds grand.