In contemplating an essay about the definition of a small business, I considered many characteristics. The SBA defines a business as “small” based on annual revenue, and the SBA size standards are assigned according to industry. In other words, in one industry a company is considered a small business if it generates less than $7 million per year, while in another industry a company may be considered a small business if it generates less than $500,000 per year. For the SBA, the term “small business” denotes a business that qualifies for SBA programs and resources.
A business can also be categorized as “small” based on number of employees. In general, the IRS considers a small business as one that has less than 100 employees. Various government agencies in the U.S. have their own standards for determining whether a business is technically considered small. For the purposes of financing, official classification, and eligibility for government and private programs for small businesses, you will need to research the specific organization’s definition of small business to see if your business would be included in the definition.
Although the official definition of small business varies from one organization to another, in my mind, there are certain essential characteristics that define a small business, regardless of number of employees or annual revenue.
1. Small Staff that Works as a Team to Divide Tasks
In any small business, the number of employees is smaller than the number of job descriptions included in the company. This means that each employee has to fill multiple roles. For example, in a traditional small business the owner might act as a salesperson, accountant, and inventory manager. One employee may handle customer service, signage, and cleaning tasks. It’s true, in most businesses big and small there is incomplete division of labor. Most employees have at least a few tasks to handle. But in a small business, an employee’s tasks are often incongruous. The same employee with expertise in engineering may be called upon to handle marketing, even though he/she has no experience in marketing.
2. Limited Resources to Hire New People
A small business usually has a core staff who functions as a team to complete all the included tasks. As an employee or even an owner of a small business, you will more than likely be required to branch out into tasks that are not your forte, because the business cannot afford to hire a specialized person for every job.
3. Synergy Between Employees
The third aspect I think is essential to small businesses is that everyone involved must have passion for the work, the mission, and/or the company. A heightened level of dedication by every team member is essential for a small business to flourish. In psychology, this is called synergy, and is defined as a system in which the team as a whole surpasses the sum of its parts. In other words, when we work together, the shared energy allows us to achieve more than we would have achieved separately.
Most small businesses struggle with growth because the owner is too busy to take on marketing singlehandedly. But, unless you opened your doors to a huge client base from the start, you will need to grow in order to stay in business. If your staff doesn’t synergize, you may find that growing your business is next to impossible.
Growth comes from keeping existing customers AND finding new customers, not just one or the other. While everyone in your staff doesn’t necessarily have to participate in marketing efforts, you need everyone to be “on board” with your plans. Your entire staff has to believe in what you’re doing, and in the future of your business, or your growth will be stifled from day one. At the very least, your entire staff should talk up your business and help draw traffic to your doorstep or to your website.
In this post I’ve discussed some hallmarks of successful small businesses, but one of the great things about small businesses is that there is no single formula for success. Your passion is what got you into business in the first place, and your single biggest mistake could be becoming too busy with daily maintenance to let your passion carry the business in new directions.
July 23rd, 2009 at 11:19 pm
Thanks for posting about this, I would like to read more about this topic.