We often talk about small businesses but what exactly is a small business? It’s not as simple as one might think. In fact, there are many definitions out there depending on who is asked and what goals are to be accomplished. A “small business” can range from a solo web entrepreneur all the way up to a multi-million-dollar business.
For me, it always makes me cringe to hear the word “small” as a descriptor for my business or the business of any of my clients. After all, as business owners, we work very hard and playing small is NOT a goal!
The definition can also affect things like government policies and loan programs for small business.
Let’s start by first establishing what a business is. Simply put, if you’re providing goods or services to customers, you’re a business. You don’t have to be set up as a corporation, partnership or any other type of legal entity; sole proprietors are a type of business as well.
Now, on to the fun part. What standards make a business small? For the purpose of this article, I will only refer to the standards set by the United States Federal Government.
The U.S. Small Business Administration uses revenue and/or number of employees to define a small business. However, it applies different standards in different industries. The definitions can vary quite a bit. For example, the standard for a graphic design business is $7.5 million. It can even vary within industries: if you’re a caterer, the limit is $7.5 million, but a “food service contractor”, it’s a whopping $38.5 million. Additionally, some definitions are based on number of employees only—often with limits of 500 employees.
No wonder more than 95 percent of the businesses in the United States is defined as a “small business”. So, the next time you hear the word “small” as a descriptor for your business – keep pushing. You’re in great company!
