Businesses come in many sizes and this can make a difference in how contracts are signed and how the affairs are managed. This can also affect how much government assistance an owner is offered, and how much revenue is brought in on an annual basis.
What Determines a Companies Size?
The U.S. Small Business Administration, or SBA, has developed size standards for businesses all throughout the United States. Size is determined, by their definition, by how many people work for the firm throughout the course of a year and the firm’s average annual receipts. Following this logic, a small business would have overall less annual employment than a medium or a large business would.
The SBA has programs available for firms that meet their business size standards. These kinds of programs can provide grant money for persons working in very specific fields, such as scientific research and development. This is only through the federal government, however; some states can provide money that would allow a person to start up a business in any industry, but this varies by location.
Benefits/Downsides of Small Business Traits
There are a variety of pros and cons to being a small business. A smaller business may have fewer employees and less overall profits, but this does not mean they are a waste of entrepreneurial time. They are often the cornerstones of a larger business, that is, what often begins as one person’s idea can grow into something greater. A local restaurant can become a food chain if it is popular enough and managed well.
Small companies also have less hierarchical structure to them, having employed few people overall, it would stand to reason that there are fewer people up at the top. This can make for well-rounded employees, seeing as everyone would have to step up and act as manager at some point during work, and this level of flexibility can allow decisions to be made much more quickly. Customers can also get an answer to a question much more quickly as well.
Another advantage of working for a small company is that everyone is close to the action. Because of the size and fluidity, everyone gets a feel for how to deal with customers, but also to know the intimate details of how every part works. This sort of business intimacy is not found in many large firms.
However, the lack of structure may not work in all situations, as a lack of direction and command is often a death sentence for many firms. Having roles that are less clearly defined could work very well in some cases, but in others it can lead to confusion and lower productivity.
The smallness of a business is good for the economies of small towns, as these companies pay taxes to the city and the county they are situated in. If business is good, then everyone in the immediately proximity will benefit, even if they do not regularly patronize the establishment. The tax money can go the improvement of roads, sidewalks, and other necessary construction projects. More than that, it could even go towards public education.
Small businesses also provide job opportunities for the citizens of the community around them. This keeps them in town, spending their money on other local businesses, but it also provides a valuable use of their time and other potential benefits (such as health insurance). They also tend to utilize the services of other local businesses, such as banks and transportation.
Large Business Pros/Cons
Of course, large businesses are not without their benefits. For one thing, large businesses can provide jobs for multiple people in various locations, whereas small businesses are almost always local by definition. Large businesses tend to provide essential goods and services to their customers, and so they help fix a need that people have.
The jobs they offer are also more stable for two reasons: one, large businesses have a steadier stream of customers, and two, they have greater brand recognition overall. Larger businesses may also be able to offer more benefits in the way of health insurance, paid vacation, and so forth. A large business may also be a good first job opportunity for a person to learn the ropes of management, without putting too much of their own stock at risk.