Small Business Definitions

TELE 0523
Allan Ortiz
Kevin Manalo
Lionel Mananquil
Jules Gerald Melgarejo
Ace Daniel Mascarinas
 Features of Small Business

 Not every small business eventually grows to the

size of large corporation. Some businesses are
ideally suited to operate on a small scale for years,
often serving a local community and generating
just enough profit to take care of company
owners.

 Small-scale businesses display a distinct set of

identifying characteristics that set them apart from
their larger competitors.
 Lower Revenue and Profitability

 Small-scale business revenue is generally lower than

companies that operate on a larger scale. The Small
Business Administration classifies small businesses as
companies that bring in less than a specific amount of
revenue, depending on the business type.

 The maximum revenue allowance for the small

business designation is set at $21.5 million per year
for service businesses.
Lower revenue does not necessarily translate
into lower profitability. Established small-scale
businesses often own their facilities and
equipment outright, which, in addition to other
factors, helps to keep costs lower than more
leveraged businesses.
 Smaller Teams of Employees

 Small-scale businesses employ smaller teams

of employees than companies that operate on
larger scales. The smallest businesses are run
entirely by single individuals or small teams.

 A larger small-scale business can often get

away with employing fewer than one hundred
employees, depending on the business type.
 Small Market Area

 Small-scale businesses serve a much smaller area

than corporations or larger private businesses. The
smallest-scale businesses serve single communities,
such as a convenience store in a rural township

 The very definition of small-scale prevents these

companies from serving areas much larger than a
local area, since growing beyond that would
increase the scale of a small business's operations
and push it into a new classification.
 Sole or Partnership Ownership and Taxes
 The corporate form of business organization is not well-
suited to small-scale operations. Instead, small-scale
businesses prefer to organize as sole proprietorships,
partnerships or limited liability companies. These forms of
organization provide the greatest degree of managerial
control for company owners, while minimizing the hassle
and expense of business registration.

 These businesses generally do not file their own taxes;

instead, company owners report business income and
expenses on their personal tax returns.
 Limited Area of Fewer Locations
 A small-scale business, by definition, can be
found only in a limited area. These companies are
not likely to have sales outlets in multiple states
or countries, for example.

 A large number of small-scale businesses operate

from a single office, retail store or service outlet.
It is even possible to run a small business directly
out of your home, without any company facilities
 Advantage of Small Business

Being a business owner can be

extremely rewarding. Having the
courage to take a risk and start a
venture is part of the American dream.
Success brings with it many
advantages:
 Independence.

As a business owner, you’re your own

boss. You can’t get fired. More
importantly, you have the freedom to
make the decisions that are crucial to
your own business success.
 Lifestyle
 Owning a small business gives you certain lifestyle
advantages. Because you’re in charge, you decide
when and where you want to work. If you want to
spend more time on nonwork activities or with your
family, you don’t have to ask for the time off.

 If it’s important that you be with your family all

day, you might decide to run your business from
your home. Given today’s technology, it’s relatively
easy to do. Moreover, it eliminates commuting time.
 Financial rewards.
 In spite of high financial risk, running
your own business gives you a
chance to make more money than if
you were employed by someone else.
You benefit from your own hard
work.
 Learning opportunities
 As a business owner, you’ll be
involved in all aspects of your
business. This situation creates
numerous opportunities to gain a
thorough understanding of the
various business functions.
Creative freedom and personal satisfaction.
 As a business owner, you’ll be able to
work in a field that you really enjoy.
You’ll be able to put your skills and
knowledge to use, and you’ll gain
personal satisfaction from implementing
your ideas, working directly with
customers, and watching your business
succeed.
Disadvantage of Small business
 As the little boy said when he got
off his first roller-coaster ride, “I
like the ups but not the downs!”
Here are some of the risks you run
if you want to start a small
business:
 Financial risk.
 The financial resources needed to start and grow a
business can be extensive. You may need to
commit most of your savings or even go into debt
to get started. If things don’t go well, you may
face substantial financial loss.

 In addition, there’s no guaranteed income. There

might be times, especially in the first few years,
when the business isn’t generating enough cash for
you to live on.
 Stress
 As a business owner, you are the
business. There’s a bewildering array of
things to worry about—competition,
employees, bills, equipment breakdowns,
customer problems. As the owner, you’re
also responsible for the well-being of
your employees.
 Time commitment
 People often start businesses so that they’ll
have more time to spend with their families.
Unfortunately, running a business is extremely
time-consuming. In theory, you have the
freedom to take time off, but in reality, you
may not be able to get away.

 In fact, you’ll probably have less free time

than you’d have working for someone else.
 Undesirable duties.
 When you start up, you’ll undoubtedly be
responsible for either doing or overseeing just
about everything that needs to be done. You
can get bogged down in detail work that you
don’t enjoy.

 As a business owner, you’ll probably have to

perform some unpleasant tasks, like firing
people.
 Why do small business fail?

Running a business is not for the faint of

heart; entrepreneurship is inherently risky.
Successful business owners must possess
the ability to mitigate company-specific
risks while simultaneously bringing a
product or service to market at a price point
that meets consumer demand levels.
While there are a number of small businesses in
a broad range of industries that perform well and
are continuously profitable, 20% of small
businesses fail in the first year, 50% go belly up
after five years, and only 33% make it to 10
years or longer, according to the
Small Business Administration
 To safeguard a new or established business, it
is necessary to understand what can lead to
business failure and how each obstacle can be
managed or avoided altogether.

 The most common reasons small businesses

fail include a lack of capital or funding,
retaining an inadequate management team, a
faulty infrastructure or business model, and
unsuccessful marketing initiatives.
 What Are Some Signs That Your Business
Is Failing?
Signs that a business is failing include
small levels or lack of cash, inability to
pay back loans on time, inability to pay
suppliers on time, customers that pay
late, loss of clientele, and an unclear
business strategy.
The 4 Most Common Reasons a
Small Business Fails
1. Financing Hurdles

 A primary reason why small businesses fail is a

lack of funding or working capital. In most
instances a business owner is intimately aware
of how much money is needed to keep
operations running on a day-to-day basis
 Including funding payroll; paying fixed and varied
overhead expenses, such as rent and utilities; and
ensuring that outside vendors are paid on time;
however, owners of failing companies are less in
tune with how much revenue is generated by sales
of products or services.

 This disconnect leads to funding shortfalls that

can quickly put a small business out of operation.
 Small companies in the startup phase
can face challenges in terms of
obtaining financing in order to bring
a new product to market, fund an
expansion, or pay for ongoing
marketing costs.
2. Inadequate Management
 Another common reason small businesses fail
is a lack of business acumen on the part of the
management team or business owner.

 In some instances, a business owner is the only

senior-level person within a company,
especially when a business is in its first year or
two of operation.
 While the owner may have the skills necessary
to create and sell a viable product or service,
they often lack the attributes of a strong
manager and don't have the time to successfully
oversee other employees

 Without a dedicated management team, a

business owner has greater potential to
mismanage certain aspects of the business,
whether it be finances, hiring, or marketing.
 Smart business owners outsource the
activities they do not perform well or
have little time to successfully carry
through. A strong management team is
one of the first additions a small business
needs to continue operations well into the
future.
3. Ineffective Business Planning

Small businesses often overlook the importance

of effective business planning prior to opening
their doors. A sound business plan should
include, at a minimum:

 A clear description of the business.

 Current and future employee and management
needs.
 Opportunities and threats within the
broader market
 Capital needs, including projected

cash flow and various budgets

 Marketing initiatives
 Competitor analysis
Business owners who fail to address the
needs of the business through a well-laid-
out plan before operations begin are setting
up their companies for serious challenges.
To avoid pitfalls associated with business
plans, entrepreneurs should have a solid
understanding of their industry and
competition before starting a company.
 4. Marketing Mishaps
 Business owners often fail to prepare for the
marketing needs of a company in terms of
capital required, prospect reach, and accurate
conversion-ratio projections.

 When companies underestimate the total cost

of early marketing campaigns, it can be
difficult to secure financing or redirect capital
from other business departments to make up
for the shortfall.
Because marketing is a crucial aspect
of any early-stage business, it is
necessary for companies to ensure that
they have established realistic budgets
for current and future marketing
needs.
Thank you for
Listening!!