This chapter of the book is devoted to the analysis of small business. So let us define this main topic. Small business is a business which is independently owed and operated and is not dominant in its field of operation. A small business has four characteristics:
The boss owns the business
Financing is provided by one or just a few individuals
Most of the people working for this business live in the same community
The business is small compared to the dominant firms of the industry.
In this table you can see the constraints of a small business definition in numbers. Small business is the source of nearly half of the workplaces in the US. So without small business America would be out of work and out of money. It is also responsible for about 40 percent of the gross national product in 1980ies. This is quite a big number. Small businesses are frequently the innovators in their industries. Big business means big bureaucracy – lots of paperwork that slows everything down. And big business also produces mass production. While small business doesn’t have such problems. That is why without small business many products would never be made.
So let’s characterize them. About 80 percent of all service businesses are small businesses – they employ less than 500 people. Service businesses are travel agencies, amusement parks, motels. Wholesaling is also one of the sectors which is dominated by small businesses. Wholesalers are like intermediaries between manufacturers and retailers. Retailers sell products to final consumers for their own use. Only 18% of small businesses are producers in the US. The problem is that they cannot produce things as cheap as the big producers. Nevertheless, there are lots of small producers in construction industry, because this industry does not require much equipment – just skilled labour. …
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