What is the definition of a small business? Although you might think there is a simple answer to this question it actually gets convoluted and confusing depending on who responds with an answer.
In the eyes of many a small business is defined as a “Mom and Pop” owned business or maybe a business located on a city or town’s “Main” street. The number of people employed by these “small” businesses varies but usually run around ten or less. Other types of businesses that would fall under this definition would be those who have no employees at all, such as solopreneurs or freelancers.
The confusion over what is defined as a small business comes into play when you get the media, the government (politicians included) and pollsters involved. According to the Small Business Administration the size standards of a business is based on the industry and the cap can vary from 100 to 1500 employees. They also base it on annual revenue that varies from $0.5 to $21.5 million. These are both huge in variance and in no way can be compared with the annual income of a “Mom and Pop” or “Main Street” business. More confusion comes into play when you have laws such as the Affordable Care Act come into play. According to the HealthCare.Gov website a business that employees 50 or fewer full time workers is classified as a small business. It goes a step further by stating businesses that have 25 or less full time employees and average yearly wages under $50,000 are entitled to health care tax credits.
With such discrepancies on what is classified as a small business it is no wonder that those businesses that are truly small feel like they are left out to hang when all they are trying to do is keep their dream alive of having a successful business. These true small businesses have to compete against “bigger” small businesses for loans and government contracts. With limited resources the smaller “small” businesses are at a disadvantage to compete with the larger “small” businesses who have unlimited resources at their disposal.
Clumping data gathered in reports of businesses with 500 employees with those that employee 10 or less are doing the smaller sized businesses a disservice. As long as there is a wide discrepancy as to what defines a small business there will always be confusion as to what is best being done to help them.
What’s your take? How is your small business affected by the convoluted definition of a small business? Let us know in the comment section below.
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