Small Business Ideas, Start Small Business, Small Business Analysis
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Small Business Ideas, Start Small Business, Small Business Analysis

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You have Small Business Ideas and you want to Start a Business, Start Small Business and be independent. But do you know what is involved with Starting Small Business? There may be things you are not fully aware of yet before you Start a Business. Read this page to get more Small Business Ideas for your intended business.

A small business may be defined as a business with a small number of employees. The legal definition of "small" often varies by country and industry, but is generally under 100 employees in the United States while under 50 employees in Australia and the European Union (In comparison, the American definition of mid-sized business by the number of employees is generally under 500 while 250 is for that of European Union). These businesses are normally privately owned corporations, partnerships, or sole proprietorships.
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However, other methods are also used to classify small companies, such us annual sales (turnover), assets value or net profit (balance sheet), alone or in a mixed definition. These criteria are followed by the European Union, for instance (headcount, turnover and balance sheet totals).

 
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Small businesses are common in many countries, depending on the economic system in operation. Typical examples include: convenience stores, other small shops (such as a bakery or delicatessen), hairdressers, tradesmen, solicitors, lawyers, accountants, restaurants, guest houses, photographers, small-scale manufacturing etc. Small businesses are usually independent.

The smallest businesses, often located in private homes, are called micro-businesses (term used by international organizations such as the World Bank and the International Finance Corporation) or SoHos.

The term "mom and pop business" is a common colloquial expression for a single-family operated business with few (or no) employees other than the owners. When judged by the number of employees, the Australian, American and the European definitions are the same: under 10 employees.


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Advantages of Small Business

A small business can be started at a very low cost and on a part-time basis. Small business is also well suited to Internet marketing because it can be very manageable to serve a niche, something that would have been more difficult prior to the Internet revolution which began in the late 1990s.

Adapting to change is crucial in business and particularly small business; not being tied to any bureaucratic inertia, it is typically easier to respond to the marketplace quickly. Small business proprietors tend to be intimate with their customers and clients resulting in greater accountability and responsiveness.



Problems faced by Small Businesses

Small businesses often face a variety of problems related to their size. A frequent cause of bankruptcy is under-capitalization. This is often a result of poor planning rather than economic conditions - it is common rule of thumb that the entrepreneur should have access to a sum of money at least equal to the projected revenue for the first year of business in addition to his anticipated expenses.

For example, if the prospective owner thinks that he will generate $100,000 in revenues in the first year with $150,000 in start-up expenses, then he should have no less than $250,000 available. Failure to provide this level of funding for the company could leave the owner liable for all of the company's debt should he end up in bankruptcy court, under the theory of under-capitalization.

In addition to ensuring that the business has enough capital, the small business owner must also be mindful of gross margin (sales minus variable costs). To break even, the business must be able to reach a level of sales where the gross margin exceeds fixed costs.

When they first start out, many small business owners underprice their products to a point where even at their maximum capacity, it would be impossible to break even. The good news is that cost controls or a price increase can often resolve this problem.

In the United States, some of the largest concerns of small business owners are insurance costs (such as liability and health), rising energy costs and taxes. In the United Kingdom and Australia, small business owners tend to be more concerned with excessive governmental red tape.

Another problem for many small businesses is termed the 'Entrepreneurial Myth' or E-Myth. The mythic assumption is that an expert in a given technical field will also be expert at running that kind of business. Additional business management skills are needed to keep a business running smoothly.


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Marketing the Small Business

Common marketing techniques for small business include networking, word of mouth, customer referrals, yellow pages directories, television, radio, outdoor (roadside billboards), print and Internet. Electronic media like TV can be quite expensive and is normally intended to create awareness of a product or service.

Many small business owners find Internet marketing more affordable. Google AdWords and Yahoo! Search Marketing are two popular options of getting small business products or services in front of motivated Web searchers. Advertising on niche sites can also be effective, but with the long tail of the Internet, it can be time intensive to advertise on enough sites to garner an effective reach.



Franchise Small Businesses

Franchising is a way for small business owners to benefit from the economies of scale of the big corporation (franchiser). McDonald's restaurants are an example of a franchise. The small business owner can leverage a strong brand name and purchasing power of the larger company while keeping their own investment affordable.

However, some franchisees conclude that they suffer the "worst of both worlds" feeling they are too restricted by corporate mandates and lack true independence. McDonald's has even been sued by franchisees who feel they have been exploited with unreasonable costs for materials (cups, condiments etc.) they are required to purchase from the parent company.



Mom and Pop Small Businesses

In North American English small or micro businesses that are family-owned and family-operated may be termed Mom and pop businesses. People who speak of mom and pop businesses often refer to the unique perspective offered by patronizing a family business. Some encourage the unknown experience of entering a mom and pop establishment over patronizing franchise businesses, which typically offer comparable stores and similar consumer experiences, regardless of location.

For example, mom and pop businesses are often highlighted in travel guides, because patronizing a family-owned and operated business allows a traveler to more fully experience and understand the people of another culture.


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Small Business Bankruptcy

When small business fails, the owner may file bankruptcy. In most cases this can be handled through a personal bankruptcy filing. Corporations can file bankruptcy, but if it is out of business and valuable corporate assets are likely to be repossessed by secured creditors there is little advantage to going to the expense of a corporate bankruptcy.

Many states offer exemptions for small business assets so they can continue to operate during and after personal bankruptcy. However, corporate assets are normally not exempt, hence it may be more difficult to continue operating an incorporated business if the owner files bankruptcy.


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Start Saving Money

So why not start by trying to save money for your business. Here are some tips, you can start by doing following:


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Business Tips

Some tips on how to avoid business failure:

  • Don't underestimate the capital you need to start up the business.

  • Understand and keep control of your finances - income earned is not the same as cash in hand.

  • More volume does not automatically mean more profit - you need to get your pricing right.

  • Make sure you have good software for your business, software that provides you with a good reporting picture of all aspects of your business operations.


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