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What is a small business?

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While you may think that the gourmet grocer or the upscale boutique that sells one of a kind clothes are small businesses you may be surprised to find out that you could be right or wrong.Small businesses are generally defined as a business that is independently owned and operated, with a small number of employees and relatively low volume of sales. It is important to keep in mind that the legal definition of "small" often varies by country and industry, but is generally under 100 employees in the United States and under 50 employees in the European Union. In comparison, the definition of any mid-sized business by the number of employees is generally under 500 in the United States and 250 for the European Union. Small businesses are normally organized as privately owned corporations, partnerships, or sole proprietorships.

In addition to the number of employees within a business there are other methods used to classify small companies that include annual sales (turnover), value of assets and net profit (balance sheet), alone or in a mixed definition. Another less formal criterion is that small businesses are usually not dominant in their field of operation.

Depending on the economic system in operation small businesses are common in many countries. Typical examples of small businesses can include but are not limited to: convenience stores, other small shops (such as a bakery or delicatessen), hairdressers, tradesmen, lawyers, accountants, restaurants, guest houses, photographers, small-scale manufacturing etc.

The smallest businesses which are often located in private homes are called micro businesses (this is a term used by international organizations such as the World Bank and the International Finance Corporation). The term "mom and pop business" is a common expression for a single-family operated business with few (or no) employees other than the owners. When micro businesses are judged by the number of employees, the American and the European definitions are the same: under 10 employees.

One of the biggest advantages is that a small business can be started at a very low cost and on a part-time basis. Small businesses are also well suited to internet marketing because they can easily serve specialized niches.This would have been much more difficult prior to the internet revolution which began in the late 1990s. Since adapting to change is crucial in business and particularly small business and since small businesses are not tied to any bureaucratic inertia, it is typically easier to respond to the marketplace quickly. In addition small business proprietors tend to be intimate with their customers and clients which results in greater accountability and responsiveness.

Small business owners report that independence is another advantage of owning a small business. One survey of small business owners showed that 38% said their main reason for leaving another job was that they wanted to be their own bosses. Freedom to operate independently is considered a huge reward for small business owners. In addition, many people who open a small business desire to make their own decisions, take their own risks, and reap the rewards of their efforts. Small business owners also have the satisfaction of making their own decisions though this is within the constraints imposed by economic and other environmental factors. However, most small business owners have to work very long hours and understand that ultimately their customers are their bosses.

If you are considering opening your own small business there are several organizations that provide help for the small business sector, such as the Internal Revenue Service's Small Business and Self-Employed One-Stop Resource. Doing your research both online and in the real world will help the prospective small business owner develop a business plan and implement it towards a successful small business.

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