A small business is one that is independently owned and operated. It exerts little influence in its industry (a small pizza place won’t change how pizza is made or how service is performed) and typically has less than 500 employees. There are 28 million small businesses in the US generating 54% of sales and 55% of jobs in the country. As you can see, small businesses hold a very important role in America’s economy.
Importance of Small Business
Small firms hire more frequently and fire more frequently than other form of business and organizations. There are many new ventures opening per year, many closing at the same time too. A strong economy encourages individuals to star new business, weak ones does the opposite.
- 44% jobs generated by companies with 1-49 employees.
- 40% jobs generated by companies with 50-499.
- 16% jobs generated by companies with 500+ employees.
Undoubtedly, small businesses create more jobs.
Small companies develop more patents per employee than large companies do. They adapt quickly to environmental changes and external forces, finding new ways of doing old things. They offer incentives and a flexible structure that allows individuals to develop their potential and talent to invent new products and methods. Small business license around 26,5% of patterns per 100 employees while big companies only license 17% patter per 100 employees. An SBA study (Small Business Administration) says small firms are 13 times more innovative per employee than traditional large firms, as they tend to have a less innovation-friendly environment.
In order to cope with this situation and provide a better and more flexible place for the creation of innovative ideas, large companies have responded by downsizing their structure to act more like a small company. They also have created separate units within the organization whose major goal is to spark innovation.
Small businesses allow individuals, including women and minorities to achieve financial success, as well as pride in their organization. Nowadays, more women become their own bosses thanks to the flexibility and ease of creating a new company.
Small Business Owner vs Entrepreneur
It is important to mention and distinguish the difference between business owners and entrepreneurs. An entrepreneur is someone who takes risks and implements innovative ideas for planned ventures; they start companies to create new products or improve old ones. They strive to meet a need that is not being met, and their goal is to grow the business and expand markets. A small business owner, for the contrary, does not take risks either innovate. They start for the sole purpose of providing an income for themselves and for their families. They tend to act and provide goods and services the same way they have been doing it for years and especially, they do not try to expand their business. For them, business is a lifestyle.