What Defines a Small Business?

A business venture falls into three major categories i.e. small, medium and large scale. They all have different definitions depending on a number of factors, but the most commonly used are the number of employees and the rate of return per year. Other factors that may be used to define the size is, the location of the enterprise and also its ownership type.

A small business is defined as one that is owned by an individual and it operates privately. It could be based at the owners home or at a location that does not occupy so much space. The number of employees for such an enterprise is small, but this again depends on the country. In United States for example, the number of employees has to be less that 100, while in the European Union, they have to be less than 50. In Australia, a small enterprise is qualified as one with less than 20 employees in terms of work-force.

When it comes to classification according to the rate of returns, the value of assets or the net profit may be looked at, either in isolation or in a mixed definition. A small business may not have much to show for and the annual earnings are normally less than $5000 per annum. However, this amount differs in accordance to where the enterprise is located.

Many of the ventures that qualify as small businesses and which are typical examples in many nations include convenience stores, small shops, hairdressing points, restaurants, guest houses, photography shops and small scale manufactures. Others are home-based and they mostly operate online from the convenience of their homes. They are referred to as micro-businesses. They all come with their own varied advantages, which all become evident during operation depending on how their owner decides to run the enterprise.