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Explain the characteristics of small business.

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Researchers and analysts of small or owner-managed businesses generally behave as of normal organizational forms (e.g., partnership, sole-trader, or corporation), and the consequent legal and accounting boundaries of owner-managed firms are consistently meaningful. However, owner-managers often do not delineate their behavior to accord with the implied separation between their personal and business interests.

Lenders also often contract around organizational (corporate) boundaries by seeking personal guarantees or accepting privately held assets as collateral. Because of this behavior, researchers and analysts may wish to be cautious in the way they assess the organizational types and implied boundaries in contexts relating to owner-managed firms. These include analyses that use traditional accounting disclosures, and studies that view the firm as defined by some formal organizational structure.

Relationship with entrepreneurship: 

In contrast, entrepreneurial ventures offer an innovative product, process or service, and the entrepreneur typically aims to scale up the company by adding employees, seeking international sales, and so on, a process which is financed by venture capital and angel. Successful entrepreneurs have the ability to lead a business in a positive direction by proper planning, to adapt to changing environments and understand their own strengths and weakness.The term “entrepreneur” is often conflated with the term “small business” or used interchangeably with this term. While most entrepreneurial ventures start out as a small business, not all small businesses are entrepreneurial in the strict sense of the term. Many small businesses are sole proprietor operations consisting solely of the owner, or they have a small number of employees, and many of these small businesses offer an existing product, process or service, and they do not aim at growth.

Size definitions:The legal definition of “small business” varies by country and by industry. In the United States, the Small Business Administration establishes small business size standards on an industry-by industry basis, but generally specifies a small business as having fewer than five hundred employees for manufacturing businesses and less than $7.5 million in annual receipts for most non manufacturing businesses.

The definition can vary by circumstance – for example, a small business having fewer than twenty-five full-time equivalent employees with average annual wages below $50,000 qualifies for a tax credit under the health care reform bill Patient Protection and Affordable Care Act. The European Union generally defines a small business as one that has fewer than fifty employees. However, in Australia, a small business is defined by the Fair Work Act 2009 as one with fewer than fifteen employees. By comparison, a medium-sized business or mid-sized

AUSUSCANEU
Minute/Micro1-21-61-4<10
Small<15<2501-99<50
Medium<200<500100-499<250
Large<500<1000>500<1000
Enterprise>500>1000N/A>1000

 

Most cells reflect sizes not defined in legislation business has fewer than five hundred employees in the US, and fewer than two hundred in Australia. In addition to number of employees, other methods used to classify small companies include annual sales (turnover), value of assets and net profit (balance sheet), alone or in a mixed definition. These criteria are followed by the European Union, for instance (headcount, turnover, and balance sheet totals). Small businesses are usually not dominant in their field of operation. 
The table below serves as a useful guide to business size nomenclature.
Business size definitions (by number of employees) Some definitions are multi-parameter, e.g., by industry, revenue or market share Demographics According to the US 2012 Survey of Business Owners (SBO) there are: 27.6 million businesses in the United States. 9.9 million of these businesses in the United States were owned or led by a woman, representing 35.9% of overall business ownership. African Americans have a long tradition of business ownership in the United States.
Franchise businesses: Franchising is a way for small business owners to benefit from the economies of scale of the big corporation (franchiser). McDonald’s and Subway are examples of a franchise. The small business owner can leverage a strong brand name and purchasing power of the larger company while keeping their own investment affordable. However, some franchisees conclude that they suffer the “worst of both worlds” feeling they are too restricted by corporate mandates and lack true independence.

It is an assumption that small business are just franchisees, but the truth is many franchisers are also small businesses, Although considered to be a successful way of doing business, literature has proved that there is a high failure rate in franchising as well, especially in UK, where research indicates that out of 1658 franchising companies operating in 1984, only 601 remained in 1998, a mere 36%.

Retailers cooperative: A retailers’ cooperative is a type of cooperative which employs economies of scale on behalf of its retailer members. Retailers’ cooperatives use their purchasing power to acquire discounts from manufacturers and often share marketing expenses. It is common for locally owned grocery stores, hardware stores, and pharmacies to participate in retailers’ cooperatives. Ace Hardware, True Value, and NAPA are examples of a retailers’cooperative.

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