small business

What is a Small Business?

Definition of Small Business

  • A small business has no single agreed-upon definition, which may depend on various factors, including:

    • Number of employees

    • Annual sales volume

    • Ownership structure (e.g., sole proprietorship vs. corporation)

  • The Small Business Administration (SBA) defines small businesses based on quantitative criteria, which are observable and measurable:

    • Determines eligibility for federal contracts based on employee count and sales revenue.

SBA Size Standards (as of August 2019)

  • Funeral homes: Revenue capped at $8 million/year

  • Crematories: Revenue capped at $22 million/year

  • The SBA provides a Size Standards Tool for businesses to check their classification.

    • Relevant codes are:

    • Funeral Homes and Funeral Services: 812210

    • Cemeteries and Crematories: 812220

  • The complete list of SBA's industry standards can be reviewed under Small Business Size Standards.

Qualitative Criteria for Small Business

  • Qualitative criteria focus more on descriptive characteristics rather than numerical data:

    • Growth Potential: Indicates potential for expansion; not necessarily rapid or exponential growth.

    • Size Comparison: Must be smaller than leading firms within the industry; these businesses don’t heavily impact the industry.

    • Geographical Operations: Predominantly operates within a local area despite potential wider marketing.

    • Financing Structure: Often financed through personal funds, family assistance, or bank loans with little external investment.

    • Management Structure: Typically has a small management team; in some cases, the owner may be the only employee.

Qualitative Definition of a Small Business

  • Small business: A business characterized by growth potential, localized operations, limited financing sources, and a small management team.

Types of Small Businesses

  • Small businesses can be classified into three primary categories:

    • Manufacturing: Converts raw materials into finished products. Examples:

    • Producing components like circuit boards for laptops.

    • Assembling complete products like refrigerators.

    • Merchandising: Purchases finished goods for resale in retail settings.

    • Includes stores that sell groceries, clothing, and electronics.

    • Service: Offers services rather than tangible products.

    • Examples: Dry cleaning, dog-walking, accounting.

  • In the context of funeral services, the industry has evolved:

    • Historically, services focused more on merchandise pre-1900.

    • Recognized as a service industry today, with many funeral homes and crematories selling various goods as well.

Economic Contribution of Small Businesses

  • Statistics showcasing the impact of small businesses:

    • 90% of U.S. businesses have fewer than 20 employees

    • 99.7% have fewer than 500 employees

    • Small businesses employ 49% of the private sector workforce and contribute to 38% of all business revenues.

    • Represent 97.3% of all U.S. exporters.

  • Notable trends:

    • Increased entrepreneurship among minorities, women, and veterans.

Entrepreneurs

  • Definition of Entrepreneur: An individual who organizes, manages, and assumes the risks of a business venture.

Reasons for Becoming an Entrepreneur

  • Reasons include:

    • Personal Fulfillment: Desire to be in control and follow personal passions.

    • Personal Satisfaction: Achieving personal goals through business ownership.

    • Independence: Preference for being one’s own boss and making independent decisions.

    • Financial Rewards: Potential for higher financial gains than traditional employment.

Keys to Success as an Entrepreneur

  • Understanding the necessary steps for success, requiring a potential paradigm shift:

    • Paradigm Shift: A fundamental change in approach or underlying assumptions.

    • Example: Copernicus’s heliocentric model redefined perceptions of the universe.

Entrepreneurial Personalities

  • Successful entrepreneurs encompass three personality types:

    • Technician Personality: Skilled practitioners focused on hands-on tasks with little interest in future planning.

    • Manager Personality: Structure-oriented individuals excelling in organization and administration but not prone to risk-taking.

    • Entrepreneur Personality: Visionaries constantly seeking growth opportunities and innovative solutions.

  • Achieving Balance: Recognizing personal strengths and weaknesses is crucial; finding mentors for guidance is advisable.

  • Mentor: A knowledgeable individual who provides guidance based on experience.

Competing with Larger Companies

  • Small businesses face challenges due to fewer resources but can leverage their size for competitive advantages:

    • Flexibility and Responsiveness: Smaller companies can adapt quickly to market changes and customer needs.

    • Integration of Integrity and Responsibility: Small businesses often reflect the owner’s values, which can resonate positively with customers.

    • Trustworthiness in a business can be a significant selling point.

    • Customer Focus: Smaller firms tend to maintain stronger customer relationships, often allowing direct communication with owners.

    • Contrast to larger companies, where customer service can feel impersonal.

    • Quality Over Quantity: Small businesses can prioritize high-quality products/services over maximum profit.

    • Innovation: Small companies often bring new ideas to market, while larger firms may focus on improving existing products.

    • Niche Market Focus: Targeting specific demographics allows small businesses to serve specialized needs that larger firms may overlook.

    • Example: A local funeral home catering to specific cultural or religious communities.