There is no end to the questions people have about small business. Whether you’re just starting out have been in business for years, you never stop asking questions, and that’s a good thing. We scoured the internet and decided to answer the top 13 questions people ask about small business.
1. Large business vs. small business: What is the difference?
The differences between small businesses and large businesses are in size, financing, legal structure and operation. Both can operate in the same market, but a small business will often serve a small selection of customers, focusing on a niche market. A large business differs by offering a wider scope of services and products to a broader range of customers.
2. What are the most successful small businesses?
The most successful small businesses fill deep needs and demands. But, some experience success quicker than others. 16 of the most successful small businesses are:
- Accounting services
- Legal firms
- Cleaning services
- Real estate services
- Mobile grooming
- Veterinary services
- Tutoring services
- Dental practices
- Landscaping and gardening
- Waste removal and haulage
- Phone/gadget repairs
- Web design
- Personal training
- Physiotherapist and chiropractic services
- Food truck operation
- Courier services
3. What makes small businesses better than big businesses?
A small business can be better than a big business because of agility and adaptability. Due to their size and scale, big businesses are often distant from customers, and the feedback echo travels further to reach decision-makers.
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On the other hand, smaller businesses have closer relationships and contact with customers. This means they can provide better customer service, apply immediate products/service improvements and adapt to industry changes faster than larger competitors.
4. Is there a maximum number of employees a small business can have?
For most companies, the maximum number of employees for a small business is 500 employees. But, there is no single metric available that informs the employee limit.
The maximum number of employees allowed for a small business will vary depending on the industry, revenue and legal setup. For example, according to the U.S. Small Business Administration (SBA), a large business in the mining industry is one that’s hiring 500 or more employees, while some manufacturers are still “small businesses” if they hire under 1,500 employees.
5. Are all LLC’s small businesses?
While an LLC (Limited Liability Company) is not a small business, it is a potential hybrid-style legal structure that a small business can operate under. Balancing the benefits of a corporation and a partnership, an LLC separates a small business owner from the business itself.
This means the personal assets of the owner (called a member) are protected from creditors. LLCs can have single or multiple members, who can each hold membership units or stakes in the business. For example, a two-member LLC can split profits and ownership by 50% to each member.
6. What causes small businesses to fail?
Why do small businesses fail? It’s a powerful question with multiple answers. But, most small businesses fail because of common mistakes like mismanaged capital/cash flow, unmotivated, poorly trained staff, a weak business model, or poor marketing and sales strategy. Contrary to common belief, a restaurant business is not more likely to fail than any other small business. Small businesses in construction, transport and warehousing industries report higher failure rates.
7. What is the revenue of a small business?
Being considered a small business by the U.S. Small Business Administration (SBA) is based on how much revenue you produce, the number of employees you hire and the industry you operate in. Most companies are considered a small business if their revenue is below $7 million. However, the revenue limit fluctuates for different industries.
In construction and building industries, small business status is maintained while operating under $33.5 million in revenue—revenue limit is higher because the SBA accommodates for industry-related overheads and expenses.
8. What are the features of a small business?
A number of features separate a small business from a large-scale business. But, the six most common features are:
- Smaller employee numbers and compact teams
- Operation in narrow, deep niche markets
- Often operate as LLCs, sole proprietorships or partnerships
- Geographically limited
- Ability to change and adapt quicker than large businesses
- Less competition for those in specialized or artistic services
9. How do you manage a small business?
It takes a lot to manage a small business and handle daily operations. Here are 10 tips on how to make sure your small business runs smoothly:
- Properly manage your finances and accounts
- Detail how you plan to grow your business
- Minimize small business expenses
- Delegate tasks that take up too much time
- Invest in employee training and skills
- Reward your team for good work
- Ensure you’re legally compliant
- Consider renting over buying
- Fill gaps missed by your competition
- Offer better customer service
10. What are the costs of running a small business?
Most small businesses cost between $3,000-$5,000 to start, according to the U.S. Small Business Administration. But, the amount it costs to run a small business depends on the type of service/product provided and the supplied cost.
Running a small construction business will cost more than a small printing business, for example. The biggest costs when managing a business are often payroll, taxes, equipment and marketing. To reduce the cost of running your small business, track expenses, hire only when necessary and start small.
11. How many hours do most small business owners work?
84% of small business owners work more than 40 hours a week, according to research from The Alternative Board. But, most small business owners seem to work 52 hours a week on average. They also don’t get many uninterrupted hours during the workday, as the average business owner reports only 1.5 hours of undisturbed, productive work during their typical day.
12. How much income does a small business owner make?
The average small business owner makes a salary of $66,373 in 2019, according to payment research company PayScale. 83% of small business owners report making below $100,000. But, how much profit a small business owner makes is influenced by industry, business owner experience and location.
In New Jersey, for example, small business owners (incorporated) report an average salary of $60,140. Meanwhile, in states like Arkansas and West Virginia, the average is lower than $50,000.
13. What are a small business owner’s responsibilities?
A small business owner can’t always delegate business-related responsibilities. The duties a business owner juggles are diverse, with roles and responsibilities ranging from marketing, team supervision to managing tax and accounting.
Daily duties will depend on an owner’s goals, the industry a business operates in and the help available. But, the survival and growth of a business remain as critical responsibilities of an owner.
Featured Image Credit: Deposit Photos.