The Small Business Sector

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Introduction to Small Business

I. Introduction to Small BusinessesII. Why People Start Their Own BusinessesIII. Current Small Business ConditionsIV. Positioning for SuccessV. Wrap Up

What is a Small Business?

• The Small Business Administration uses standards, such as the number of employees or the average annual receipts when defining a small business:

• SBA’s size standards are based on the North American Industry Classification Systems (NAICS).

• A small firm is typically allowed to hire up to 500 workers and still qualifies for various SBA and federal government procurement programs for small businesses.

What is a Small Business?

• There really is no single, official definition of what constitutes a small business.

• Overall, a small business is privately owned and operated, with a small number of employees and relatively low volume of sales.

How Important are Small Businesses?

• Small businesses drive the U.S. economy in a variety of ways:

• Small firms represent 99.7% of all employer firms.

• They employ about half of all private sector employees.

• Pay nearly 45% of total U.S. private payroll

• Have generated 60 to 80 percent of net new jobs annually over the last decade.

How Many Small Businesses are There?

• In 2007, there were 27.2 million businesses in the United States, according to the Office of Advocacy estimates.– 6.0 million firms had employees

– 20.4 million firms were without employees

• The latest data also shows that in 2002:– Women owned 6,492,795 firms

– African Americans owned 1,197,988 firms

– Hispanics owned 1,574,159 firms

– Asians owned 1,105,329 firms

– American Indians and Alaskan Natives owned 206,125 firms.

Opening & Closing

• How many businesses open and close each year?

• The number of non-employer firms has risen steadily in this decade, from 16.5 million in 2000 to an estimated 21.1 million in 2007.

Small Business Survival Rate

• According to a recent study:– Two-thirds of new employer establishments survive at

least two years.

– 44% survive at least four years

– 31% survive at least seven years

• The study found that businesses that survive four years have a better chance of surviving long-term.– After the fourth year, the rate of firms closing declines

considerably.– Source: “Business Employment Dynamics Data: Survival and Longevity, II,” by Amy E. Knaup and Merissa C.

Piazza, Monthly Labor Review, vol. 30, no. 9 (Sept. 2007), pp. 3-10; “Redefining Business Success: Distinguishing Between Closure and Failure” by Brian Headd, Small Business Economics, vol. 21, no. 1 (August 2003), pp. 51-61.

Why People Start their Own Businesses

I. Introduction to Small BusinessesII. Why People Start Their Own

BusinessesIII. Current Small Business ConditionsIV. Positioning for SuccessV. Wrap Up

People Start Businesses for a Variety of Reasons

• They want financial freedom

• They want to set their own hours

• They are tired of working for a boss

• They want to apply their experience and knowledge to a new endeavor

• They want flexibility

• They want recognition

• They want to build or create something

• They want a change from their everyday routine or current job

People Start Businesses for a Variety of Reasons

• They want to make a difference

• They want to leave a legacy

• They want the challenge and excitement

• They want to feel intellectually stimulated

• They want to exercise their entrepreneurial instincts

• They want to combine their competitive spirit with their creative inclinations

• They want to be the boss

• They want to take control of their life

Current Conditions Also Contribute to Business Startup

• Economic conditions can open the door to entrepreneurship opportunities that one may not have considered before-hand. For Example:

• Lay-offs have opened the door for new beginnings• Recent graduates are coming into the workforce with

nowhere to go• Veterans are looking to transition back into work life • Seniors cannot depend on retirement

• History has shown that recessions can be the birthing grounds for some of hardest working, most successful and creative entrepreneurs today.

Current Small Business Conditions

I. Introduction to Small BusinessesII. Why People Start Their Own BusinessesIII. Current Small Business ConditionsIV. Positioning for SuccessV. Wrap Up

Small Business & the Economy

• Like the rest of the economy, small businesses were affected by the depth of the recession in late 2008.

• If the past is an indicator, small businesses are vital to the economic recovery.

Small Business & the Economy

Current Small Business Hurdles

• Health Care

• Costs remain a constant issue for small firms.

• High Competition with Benefits

• Results in greater turnover rate.

• Financing

• Total business borrowing decreased from $1.228 trillion in 2007 to $507 billion in 2008.

• Lenders exhibited widening interest rate spreads and tightening terms of lending.

• Some surveys found small firms expressing less willingness to spend, hire or invest in the near future.

Positioning for Success

I. Introduction to Small BusinessesII. Why People Start Their Own BusinessesIII. Current Small Business ConditionsIV. Positioning for SuccessV. Wrap Up

Factors That Increase a Business’ Chance for Success

Business• Demographic Research

• Market Accessibility (product/service)

• Ability to reach your target market

• Business plan (with financial projections)

• Capital / Financial Back-up

• Goal setting and achievement

• Planning and preparation

• Location

Factors The Increase A Business’ Chance for Success

Entrepreneur • Passion • Capitalize on your strengths• Patience• Perseverance and

determination• Positive, change-oriented

attitude• Focused• Communication, (especially

the vision)

Planning is Critical

• Planning, research and more planning is critical now more than ever!

• Loans and financing are becoming harder and harder to come by, therefore:

• Banks, financers and investors have to see a clearly defined and well-thought business plan that proves your idea is strong and worthy of funding.

• They must see research that proves the potential for success.

• No longer can just anyone with an idea walk into a bank and come out a business owner. Plan, Plan, Plan!

Factors That Increase a Business’ Chance for Success

• Remember, once you get your business operational and you have an established client base, you can expand your business. Loans and financing are becoming harder and harder to come by, therefore:

• This will likely increase your financial rewards

• There are many more factors that impact a business’ potential and probability of success.

Wrap-Up

• Starting a business can be a great way to re-enter the workforce, increase flexibility in your schedule, achieve financial freedom and serve your community.

• There are a variety of options for budget business ideas, so you don’t need to invest your entire savings.

• Choosing the business opportunity that’s right for you and getting started can be challenging, so you may want to find a mentor or consultant.

• Starting a business can be done alone, with a partner, or as a contractor for a larger company.

• Startups are risky; you should minimize your risks as much as possible to give your business the best possible chance.

Where Does BizCentral USA Come In?

• Startups often have big dreams with small funds.

• This is where we come in with an advantage:

• BizCentral USA is a one-stop-shop for all entrepreneur’s needs!

– Business plan development, startup resources and tools, research tools, loan referrals, incorporation, marketing and more.

• We offer value pricing for professional quality products and services!

• Our staff is comprised of experts in a variety of fields and specialty areas, ready to assist entrepreneurs in achieving their goals!