Recent reports indicate that entrepreneurship is on the rise in the United States, with modern technology bolstering the ability of startup founders to scale their businesses at lower costs. Those who are considering entrepreneurship for themselves should read through these 10 frequently asked questions to find useful facts and information about starting a small business in the modern economy.
Q: What kind of company is considered a “small” business?
A: According to the Small Business Administration (SBA), a small business is generally defined as any company that employs fewer than 500 people. However, the SBA also dictates a size standard based on average annual revenues for the industry in which a company operates. Entrepreneurs can determine the size standard of their own business by checking the list of industry codes provided by the U.S. Census Bureau.
Q: How many small businesses exist in the United States?
A: The most recent data indicates that there are over 29 million small businesses in the United States. Of these, around 80 percent are non-employers, meaning they are run exclusively by the company’s founder, while around 20 percent are operated by the founder plus additional paid employees.
Q: How do small businesses impact the American economy?
A: Over 99 percent of all firms in the U.S. are considered to be small businesses, encompassing between 60 and 80 percent of all jobs in the country. As a group, they are responsible for roughly half of the American gross domestic product (GDP). In addition, small businesses contribute to high rates of job creation, market innovation, and diversity in the workplace.
Q: What skills do I need to run a small business?
A: While each small business will operate under different circumstances, there are certain skills that are universally important for an entrepreneur to have in order to run his or her company effectively. These include well-developed skills in areas like organization, planning, project management, communication, and sales. Entrepreneurs who find themselves lacking these abilities should consider taking business classes, finding a co-founder with complementary talents, or gaining business skills at another job before establishing their own company.
Q: Is it important to create a business plan?
A: Yes, having a business plan is an important part of establishing a company of any size. A business plan outlines the company’s goals and presents market research and financial analyses that demonstrate the venture’s potential for success. Creating a strong business plan is crucial for entrepreneurs who want to attract investors, and can also be useful for educating employees and vendors about the company’s operations.
Q: How do entrepreneurs finance their small businesses?
A: Start-up capital is a must-have when it comes to establishing any business. A lack of sufficient start-up capital is one of the leading reasons why many small businesses fail. To fund a small business venture, entrepreneurs can look to banks for a loan, or may choose to finance from their own savings. Some entrepreneurs choose to petition friends and relatives for initial investment funds, while others look for financial support from venture capital firms.
Q: How much funding do I need at the outset?
A: Ideally, an entrepreneur should start out with enough capital to pay for a full year’s worth of operating expenses. This does not include the cost of initial expenses, such as equipment purchases or rental deposits for a workspace.
Q: What are the benefits of running a new business out of my home?
A: About half of all small businesses are home-based in the United States for a reason. Operating a company from one’s home offers entrepreneurs a high degree of personal freedom, a lower degree of risk, reduced monthly expenses, and advantageous tax deductions. It also helps business owners save time by eliminating the need for a daily commute.
Q: What business services should I consider outsourcing?
A: Entrepreneurs without an accounting background should give some thought to outsourcing some accounting responsibilities. Keeping finances in order is an important part of running a small business, and business owners who are focused on too many aspects of operations may not be able to give accounting the attention it needs to stay error-free. Additionally, business owners should consider getting outside help with services like content marketing, which is an effective tool when done correctly, but requires a lot of focus to execute effectively.
Q: Where is the best place to look if I need help starting my small business?
A: Starting a small business for the first time can be a dream come true for many entrepreneurs, but that doesn’t mean the process is without hardship. Bearing the responsibility of running a new company on one’s own often brings about stress, frustration, and even feelings of loneliness. Fortunately, there are many resources available to help entrepreneurs deal with these pitfalls. Small business consultants make a living by coaching people through the process of running a business, and can offer useful guidance in the event that difficult problems arise. Additionally, government organizations like the SBA offer helpful information to small business owners through its website and physical locations in many major U.S. cities.