What Is a Small Business?


Generally speaking, small businesses are defined as those that employ fewer than fifty employees. The term small is also used to refer to the small office/home office (SOHO) category, which is defined as those having less than ten full-time equivalent employees. The Australian Bureau of Statistics uses the less than 20 employee mark as its definition of small. In the United States, the government has a more narrow definition of small, which includes companies with fewer than ten full-time equivalent employees. Small businesses also come in many shapes and sizes, with some sole proprietors only needing a business license while others employ multiple employees.

While the most important function of a small business is to provide for the needs of local consumers, they also play a large role in fueling the economy by exporting goods and services. In fact, nearly 96 percent of the world’s purchasing power resides outside the United States. Having a small business that is able to tap into the global marketplace opens up the potential for a huge expansion. It also has the added benefit of providing American goods and services to a global audience.

The Small Business Administration (SBA) defines the small as companies having less than five hundred employees and annual revenue of less than seven million dollars. The agency uses several criteria to classify small companies, including the number of employees, annual sales, and net profit. It’s no secret that many small businesses are in the red, so the SBA has established a series of industry-specific standards to help businesses meet their growth goals. Using this methodology, the small business industry is able to identify and provide assistance to smaller businesses, which helps them achieve their full potential. Small businesses are responsible for more than half of the workforce in the U.S. Moreover, small businesses have been found to be a big factor in driving job creation. SMEs are also responsible for a large percentage of innovation, which has been credited as a major contributor to America’s economic growth. The best part is that SMEs are often rewarded with government incentives that keep them in business.

While it’s not a secret that small businesses are an important part of the American economy, many still have a hard time providing the benefits of a larger firm. The small- and medium-sized business (SMB) sector is a growing industry that has the potential to open up a world of opportunity to American small businesses. There are several key steps that you can take to make sure that your company is a success, including choosing a business model that suits your unique business needs. In addition, if you are considering venturing into the world of commerce, be sure to take advantage of government incentives, such as the Small Business Administration’s micro-loans program.