Custom «The Small Business Environment» Essay Paper Sample

The Small Business Environment

A small business is a business that is owned and operated privately and has low number of employees, usually less than 500. Small businesses are the drivers of the economy of the United States, employing over half of the employees in the private sector and accounting for almost a half of America’s GDP. Latest statistics from SBA according to White (2011) says that there are over 27 million small businesses in America and 60-80% of all new jobs created in the US come from the small business sector. This paper discusses the characteristics (3) of a small business, how they contribute to the economy, and the type of small business I would venture into, and my reasons why.

Characteristics of a small business

  • Limited Funding and Revenue

            According to Australian Bureau of Statistics (2004), small businesses are in constant need of money because they are usually underfunded. Most of the time, they do not have adequate capital to take advantage of available opportunities and spur growth. This is due to the fact that owners of small businesses lack collaterals to present to lenders such as banks, to enable them secure loans to expand their businesses. As a result, their revenues are relatively lower than that of large scale businesses. However, it is important to note that low revenues do not automatically translate to low profitability. The fact that most established small businesses are the owners of their equipments and facilities enables them to reduce on costs when compared to larger businesses.

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  • Ownership, employees and taxes

            Small scale businesses are either operated by an individual, or through partnerships or even limited liability companies. These forms of business organizations helps to reduce the hassle associated with business registration while providing high managerial control for the owners. They work with fewer employees as opposed to larger businesses. Regarding tax, small businesses do not file their taxes but it is instead filed under the individual tax returns of the owner of the business (Australian Bureau of Statistics (2004).

  • Entrepreneurial spirit

            Small business owners have an incredibly high optimism, motivation, energy and a desire to be successful. They do not know the meaning of giving up, and usually they are involved in high risk businesses which are well calculated. Those who are involved in small businesses are smart people, who are focused and determined to succeed and not the ordinary Peter or Joe.

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The contribution of small businesses to the economy

            Small businesses provide employment opportunities for thousands of people for instance, in the United States; statistics as at May 2011 showed that 60%- 80% of all the new jobs that are being created in the US are from the small business sector. In addition, more than half of those working in the private sector are employed by small businesses. With the economic crisis being experienced worldwide that is characterized by high unemployment rates, the small business sector is indeed a savior to many people. Almost a half of the Gross Domestic Product of America comes from the private sector. Creating employment opportunities means people will be able to afford their daily basic needs and therefore, the rates of crime will be reduced. Low crime rates, creates a safe environment that will attract investors, hence spurring economic growth.

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My choice of small business

            If I were to start my own business, I would venture into fast food restaurants dealing with chips, chicken, soft drinks and burgers. This is because of the ever increasing demand worldwide that fast foods have. The industry is booming not only in the US (for instance, the McDonalds) but in other parts of the world as well. In the current world, where people are always busy either working or doing other forms of business, finding time to prepare a proper meal to eat is rare and that is where, fast foods come in handy. They save people from the inconvenience of having to create time out of their busy schedule to cook. I am certain that, in whatever part of the world I would decide to put my business, it will do well, owing to the high demand it has.  

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