Question: I'm confused about the definition of a "small business." When I read business magazines like Forbes, or see online articles at Inc. magazine's website, they talk about things like your board of directors, or all of your accounting staff, or other topics that have nothing to do with me. I can't identify with this, because I run an actual small business in Bellingham. What's the deal?
Answer: Yes, most of those national media lean toward using "small business" at a scale that we are not familiar with. This is partly because it's popular now to include any possible mention of small business. Let's talk about this.
Here's the scoop. A big part of the problem is that the SBA has set pretty large standards for just what qualifies as a small business. A main criterion is that the business is not dominant in its field.
After that, the size of the business is generally measured by either sales revenue, or number of employees. It may surprise you to find out that a business with hundreds of employees and millions in sales might be included. That's probably not most people's definition of a small business.
The SBA's Office of Advocacy says that in terms of numbers, about 97 percent of all U.S. businesses are classified as "small."
Running a small business is not just a miniature version of chairing a big business. It's qualitatively different. Nearly every business with 100 or more employees will have several departments and some middle managers. The CEO's role is to lead and coordinate the departments. But in a smaller operation, you wear many hats and are much closer to the "front end" - your customers and clients.
For topics and information tailored to small businesses, check out Entrepreneur Magazine's excellent website, entrepreneur.com. In addition to current topics and articles, they offer a searchable archive of past business articles. Most of the information is relevant to what we think of as actual small businesses.
Another source of current and relevant information is the trade associations. You might not realize that many other people in your same business, nationally and internationally, share ideas and information. You need to get in on this. Nearly every field of business has trade groups with newsletters, blogs and other current information.
You can easily find these online. For example, a floral shop would Google "trade association florists" to see what's available. Scroll down through the first several pages and pick out what might be useful.
Trade groups may give you new ideas about how to run your business. Also, there are most likely trade magazines available to you at little or no cost (many now ask for a small "postage offset" of $10 or $15 a year). The reason they're free to you is that they sell your eyeballs to their advertisers.
Closer to home, consider joining the Bellingham/Whatcom Chamber of Commerce, Sustainable Connections, or the newly formed Whatcom Business Alliance. Keep up with the business scene through The Bellingham Herald and other local newspapers and their websites. The local Business Pulse Magazine focuses on small business companies and topics. Plus, SCORE and the Small Business Development Center are available to meet in person.
By the way, the former correlation between a company's total sales, its employee count and the company's market value is changing. Consider this: one small business, Instagram, is a young company, less than two years old. It has just 13 employees. Facebook bought it earlier this year for $1 billion. Is this really a small business?
Here are four websites with valuable small business content.
- Small Business Opportunities, at sbomag.com.
- Bloomberg Businessweek (they recently merged), at businessweek.com/small-business.
- A good site, but note that it's from Australia; mybusiness.com.au.
- For news and brief articles, smallbiztrends.com.
You should know a little bit about the North American Industry Classification System, or NAICS. This is pronounced "nakes." The SBA uses NAICS to establish eligibility for loans and set-asides for government contracts. As the name suggests, it was developed jointly by the United States, Canada and Mexico. A six-digit code number is assigned depending on how your business is defined. You can find your NAICS code at naics.com.
Two surprising but typical examples: in footwear manufacturing, a small business is one with fewer than 1,000 employees. In electronics stores, a small business is one with sales under $30 million annually.
So, it looks like the term "small business" is pretty much in the eye of the beholder.
Ask SCORE is prepared for The Bellingham Herald's Sunday Business section by Bob Dahms, a business counselor with the Bellingham chapter of SCORE. Submit questions for this column to Business Editor Dave Gallagher at email@example.com. To learn more about other small-business matters, contact the local SCORE chapter at 360-685-4259 to schedule an appointment. For details about the organization, visit SCORE.org.
Reach DAVE GALLAGHER at firstname.lastname@example.org or call 715-2269.