{"id":2984,"date":"2023-02-19T16:11:15","date_gmt":"2023-02-19T16:11:15","guid":{"rendered":"https:\/\/content.one.lumenlearning.com\/introductiontobusiness\/chapter\/introduction-to-small-business\/"},"modified":"2025-05-22T14:51:20","modified_gmt":"2025-05-22T14:51:20","slug":"introduction-to-small-business","status":"publish","type":"chapter","link":"https:\/\/content.one.lumenlearning.com\/introductiontobusiness\/chapter\/introduction-to-small-business\/","title":{"raw":"Learn It 8.1.1: Small Business, Big Impact","rendered":"Learn It 8.1.1: Small Business, Big Impact"},"content":{"raw":"<section class=\"textbox learningGoals\">\r\n<ul>\r\n\t<li><span data-sheets-value=\"{&quot;1&quot;:2,&quot;2&quot;:&quot;Understand what is considered a small business&quot;}\" data-sheets-userformat=\"{&quot;2&quot;:14720,&quot;10&quot;:0,&quot;11&quot;:4,&quot;14&quot;:{&quot;1&quot;:2,&quot;2&quot;:0},&quot;15&quot;:&quot;Calibri&quot;,&quot;16&quot;:10}\">Understand what is considered a small business<\/span><\/li>\r\n\t<li><span data-sheets-value=\"{&quot;1&quot;:2,&quot;2&quot;:&quot;Understand how small businesses contribute to economic growth&quot;}\" data-sheets-userformat=\"{&quot;2&quot;:14720,&quot;10&quot;:0,&quot;11&quot;:4,&quot;14&quot;:{&quot;1&quot;:2,&quot;2&quot;:0},&quot;15&quot;:&quot;Calibri&quot;,&quot;16&quot;:10}\">Understand how small businesses contribute to economic growth<\/span><\/li>\r\n<\/ul>\r\n<\/section>\r\n<h2>Entrepreneurs Drive the Economy<\/h2>\r\n\r\n[caption id=\"attachment_11671\" align=\"alignright\" width=\"330\"]<img class=\"wp-image-11671\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/3006\/2015\/05\/04214715\/entrepreneurship-1024x590.jpg\" alt=\"Three items are shown in this image: light bulbs, an airplane, and the castle at Disneyland. \" width=\"330\" height=\"190\" \/> Figure 1. What do all of these items have in common? They all represent the efforts of entrepreneurs.[\/caption]\r\n\r\n<p>Large financial institutions and corporations are often considered to be the engines of our economy, but big business is only half of the story\u2014literally. While the majority of small businesses don\u2019t operate at scale (roughly 70 percent have fewer than 100 employees), their cumulative economic impact is significant. Through inventions and innovations, entrepreneurs also shape how and how well we communicate, learn, live, and experience life. Entrepreneurship matters not only because of the employment and productivity impact, but because small businesses contribute to the resilience of their communities and the nation, and, by extension, to stability globally.<\/p>\r\n<p>In this module, we\u2019ll explore small businesses and entrepreneurship, provide perspective on the opportunities and the risks, discuss common motivations and traits, and outline the steps involved in developing a business plan.<\/p>\r\n<h2>What Is a Small Business?<\/h2>\r\n<p>The <strong>U.S. Small Business Administration<\/strong> (SBA) is the go-to source for all things small business\u2014including the statutory definition of a small business. Classification as a small business is determined by size standards\u2014either number of employees or revenue\u2014based on industry. Specifically, size standards are based on the 6-digit \u201cNAICS\u201d or North American Industry Classification System code that describes a business\u2019 economic activity. Note that the form of ownership or legal structure of a business is not a factor in determining whether an enterprise is a small business.<\/p>\r\n<p>For manufacturing businesses, the standard is generally the number of employees, with maximums ranging from 500 to 1,500. For example, the employee maximum for a commercial bakery is 1,000, and for a business brewery, it's 1,250. For non-manufacturing industries\u2014think retailers and wholesalers\u2014the standard is based on a three-year average of annual revenue, with the maximum ranging from $9 million for florists to $40 million for electronics and appliance retailers. Financial institutions are an exception to the employee or revenue rule; commercial banks, savings institutions, and credit unions are subject to a $550 million asset limitation.<\/p>\r\n<p>Clearly, small is relative![footnote](Note that size standards change periodically (above data is current as of 2022). For the most recent criteria information, refer to the source: <a href=\"https:\/\/www.ecfr.gov\/cgi-bin\/text-idx?SID=0ff5f0839abff4eec707b4478ed733c6&amp;mc=true&amp;node=pt13.1.121&amp;rgn=div5#se13.1.121_1201\" target=\"_blank\" rel=\"noopener\">Code of Federal Regulations (eCFR) Part 121-Small Business Size Regulations<\/a>, Section 121.201; direct link: <a href=\"https:\/\/www.ecfr.gov\/cgi-bin\/text-idx?SID=0ff5f0839abff4eec707b4478ed733c6&amp;mc=true&amp;node=pt13.1.121&amp;rgn=div5#se13.1.121_1201\" target=\"_blank\" rel=\"noopener\">Small Business Size Standards by NAICS Industry<\/a>)[\/footnote] Even after your business grows and expands, it may still be considered a small business by these standards.<\/p>\r\n<p>Another determination option is to use the <a href=\"https:\/\/www.sba.gov\/size-standards\/\" target=\"_blank\" rel=\"noopener\">SBA\u2019s interactive Size Standards Tool<\/a>. This tool is designed to answer the question, \u201cAre you a small business eligible for government contracting?\u201d The tool provides a determination of either Yes (\u201cyou may be\u201d) or No, with the relevant small business size standard. To use this tool, you need to know your NAICS code or codes (multiple selections allowed). You can use the search tool on the census.gov site to determine the NAICS code(s) associated with your primary business activity.<\/p>\r\n<section class=\"textbox tryIt\">[ohm2_question height=\"350\"]4465[\/ohm2_question]<\/section>","rendered":"<section class=\"textbox learningGoals\">\n<ul>\n<li><span data-sheets-value=\"{&quot;1&quot;:2,&quot;2&quot;:&quot;Understand what is considered a small business&quot;}\" data-sheets-userformat=\"{&quot;2&quot;:14720,&quot;10&quot;:0,&quot;11&quot;:4,&quot;14&quot;:{&quot;1&quot;:2,&quot;2&quot;:0},&quot;15&quot;:&quot;Calibri&quot;,&quot;16&quot;:10}\">Understand what is considered a small business<\/span><\/li>\n<li><span data-sheets-value=\"{&quot;1&quot;:2,&quot;2&quot;:&quot;Understand how small businesses contribute to economic growth&quot;}\" data-sheets-userformat=\"{&quot;2&quot;:14720,&quot;10&quot;:0,&quot;11&quot;:4,&quot;14&quot;:{&quot;1&quot;:2,&quot;2&quot;:0},&quot;15&quot;:&quot;Calibri&quot;,&quot;16&quot;:10}\">Understand how small businesses contribute to economic growth<\/span><\/li>\n<\/ul>\n<\/section>\n<h2>Entrepreneurs Drive the Economy<\/h2>\n<figure id=\"attachment_11671\" aria-describedby=\"caption-attachment-11671\" style=\"width: 330px\" class=\"wp-caption alignright\"><img loading=\"lazy\" decoding=\"async\" class=\"wp-image-11671\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/3006\/2015\/05\/04214715\/entrepreneurship-1024x590.jpg\" alt=\"Three items are shown in this image: light bulbs, an airplane, and the castle at Disneyland.\" width=\"330\" height=\"190\" \/><figcaption id=\"caption-attachment-11671\" class=\"wp-caption-text\">Figure 1. What do all of these items have in common? They all represent the efforts of entrepreneurs.<\/figcaption><\/figure>\n<p>Large financial institutions and corporations are often considered to be the engines of our economy, but big business is only half of the story\u2014literally. While the majority of small businesses don\u2019t operate at scale (roughly 70 percent have fewer than 100 employees), their cumulative economic impact is significant. Through inventions and innovations, entrepreneurs also shape how and how well we communicate, learn, live, and experience life. Entrepreneurship matters not only because of the employment and productivity impact, but because small businesses contribute to the resilience of their communities and the nation, and, by extension, to stability globally.<\/p>\n<p>In this module, we\u2019ll explore small businesses and entrepreneurship, provide perspective on the opportunities and the risks, discuss common motivations and traits, and outline the steps involved in developing a business plan.<\/p>\n<h2>What Is a Small Business?<\/h2>\n<p>The <strong>U.S. Small Business Administration<\/strong> (SBA) is the go-to source for all things small business\u2014including the statutory definition of a small business. Classification as a small business is determined by size standards\u2014either number of employees or revenue\u2014based on industry. Specifically, size standards are based on the 6-digit \u201cNAICS\u201d or North American Industry Classification System code that describes a business\u2019 economic activity. Note that the form of ownership or legal structure of a business is not a factor in determining whether an enterprise is a small business.<\/p>\n<p>For manufacturing businesses, the standard is generally the number of employees, with maximums ranging from 500 to 1,500. For example, the employee maximum for a commercial bakery is 1,000, and for a business brewery, it&#8217;s 1,250. For non-manufacturing industries\u2014think retailers and wholesalers\u2014the standard is based on a three-year average of annual revenue, with the maximum ranging from $9 million for florists to $40 million for electronics and appliance retailers. Financial institutions are an exception to the employee or revenue rule; commercial banks, savings institutions, and credit unions are subject to a $550 million asset limitation.<\/p>\n<p>Clearly, small is relative!<a class=\"footnote\" title=\"(Note that size standards change periodically (above data is current as of 2022). For the most recent criteria information, refer to the source: Code of Federal Regulations (eCFR) Part 121-Small Business Size Regulations, Section 121.201; direct link: Small Business Size Standards by NAICS Industry)\" id=\"return-footnote-2984-1\" href=\"#footnote-2984-1\" aria-label=\"Footnote 1\"><sup class=\"footnote\">[1]<\/sup><\/a> Even after your business grows and expands, it may still be considered a small business by these standards.<\/p>\n<p>Another determination option is to use the <a href=\"https:\/\/www.sba.gov\/size-standards\/\" target=\"_blank\" rel=\"noopener\">SBA\u2019s interactive Size Standards Tool<\/a>. This tool is designed to answer the question, \u201cAre you a small business eligible for government contracting?\u201d The tool provides a determination of either Yes (\u201cyou may be\u201d) or No, with the relevant small business size standard. To use this tool, you need to know your NAICS code or codes (multiple selections allowed). You can use the search tool on the census.gov site to determine the NAICS code(s) associated with your primary business activity.<\/p>\n<section class=\"textbox tryIt\"><iframe loading=\"lazy\" id=\"ohm4465\" class=\"resizable\" src=\"https:\/\/ohm.one.lumenlearning.com\/multiembedq.php?id=4465&theme=lumen&iframe_resize_id=ohm4465&source=tnh&show_question_numbers\" width=\"100%\" height=\"350\"><\/iframe><\/section>\n<hr class=\"before-footnotes clear\" \/><div class=\"footnotes\"><ol><li id=\"footnote-2984-1\">(Note that size standards change periodically (above data is current as of 2022). For the most recent criteria information, refer to the source: <a href=\"https:\/\/www.ecfr.gov\/cgi-bin\/text-idx?SID=0ff5f0839abff4eec707b4478ed733c6&amp;mc=true&amp;node=pt13.1.121&amp;rgn=div5#se13.1.121_1201\" target=\"_blank\" rel=\"noopener\">Code of Federal Regulations (eCFR) Part 121-Small Business Size Regulations<\/a>, Section 121.201; direct link: <a href=\"https:\/\/www.ecfr.gov\/cgi-bin\/text-idx?SID=0ff5f0839abff4eec707b4478ed733c6&amp;mc=true&amp;node=pt13.1.121&amp;rgn=div5#se13.1.121_1201\" target=\"_blank\" rel=\"noopener\">Small Business Size Standards by NAICS Industry<\/a>) <a href=\"#return-footnote-2984-1\" class=\"return-footnote\" aria-label=\"Return to footnote 1\">&crarr;<\/a><\/li><\/ol><\/div>","protected":false},"author":21,"menu_order":4,"template":"","meta":{"_candela_citation":"[{\"type\":\"original\",\"description\":\"Introduction to Small Business\",\"author\":\"Nina Burokas\",\"organization\":\"Lumen Learning\",\"url\":\"\",\"project\":\"\",\"license\":\"cc-by\",\"license_terms\":\"\"},{\"type\":\"cc\",\"description\":\"Light bulbs\",\"author\":\"ColiN00B\",\"organization\":\"Pixabay\",\"url\":\"https:\/\/pixabay.com\/en\/light-bulbs-light-bulb-light-energy-1125016\/\",\"project\":\"\",\"license\":\"cc0\",\"license_terms\":\"\"},{\"type\":\"cc\",\"description\":\"Passenger Plane\",\"author\":\"PublicDomainPictures\",\"organization\":\"\",\"url\":\"https:\/\/pixabay.com\/en\/passenger-plane-passenger-jet-19469\/\",\"project\":\"\",\"license\":\"cc0\",\"license_terms\":\"\"},{\"type\":\"cc\",\"description\":\"Disney Castle\",\"author\":\"rgrivas10\",\"organization\":\"Pixabay\",\"url\":\"https:\/\/pixabay.com\/en\/disneyland-disney-castle-919924\/\",\"project\":\"\",\"license\":\"cc0\",\"license_terms\":\"\"}]","pb_show_title":"on","pb_short_title":"","pb_subtitle":"","pb_authors":[],"pb_section_license":""},"chapter-type":[],"contributor":[],"license":[],"part":2981,"module-header":"learn_it","content_attributions":[{"type":"original","description":"Introduction to Small Business","author":"Nina Burokas","organization":"Lumen Learning","url":"","project":"","license":"cc-by","license_terms":""},{"type":"cc","description":"Light bulbs","author":"ColiN00B","organization":"Pixabay","url":"https:\/\/pixabay.com\/en\/light-bulbs-light-bulb-light-energy-1125016\/","project":"","license":"cc0","license_terms":""},{"type":"cc","description":"Passenger Plane","author":"PublicDomainPictures","organization":"","url":"https:\/\/pixabay.com\/en\/passenger-plane-passenger-jet-19469\/","project":"","license":"cc0","license_terms":""},{"type":"cc","description":"Disney Castle","author":"rgrivas10","organization":"Pixabay","url":"https:\/\/pixabay.com\/en\/disneyland-disney-castle-919924\/","project":"","license":"cc0","license_terms":""}],"internal_book_links":[],"video_content":null,"cc_video_embed_content":{"cc_scripts":"","media_targets":[]},"try_it_collection":null,"_links":{"self":[{"href":"https:\/\/content.one.lumenlearning.com\/introductiontobusiness\/wp-json\/pressbooks\/v2\/chapters\/2984"}],"collection":[{"href":"https:\/\/content.one.lumenlearning.com\/introductiontobusiness\/wp-json\/pressbooks\/v2\/chapters"}],"about":[{"href":"https:\/\/content.one.lumenlearning.com\/introductiontobusiness\/wp-json\/wp\/v2\/types\/chapter"}],"author":[{"embeddable":true,"href":"https:\/\/content.one.lumenlearning.com\/introductiontobusiness\/wp-json\/wp\/v2\/users\/21"}],"version-history":[{"count":10,"href":"https:\/\/content.one.lumenlearning.com\/introductiontobusiness\/wp-json\/pressbooks\/v2\/chapters\/2984\/revisions"}],"predecessor-version":[{"id":9490,"href":"https:\/\/content.one.lumenlearning.com\/introductiontobusiness\/wp-json\/pressbooks\/v2\/chapters\/2984\/revisions\/9490"}],"part":[{"href":"https:\/\/content.one.lumenlearning.com\/introductiontobusiness\/wp-json\/pressbooks\/v2\/parts\/2981"}],"metadata":[{"href":"https:\/\/content.one.lumenlearning.com\/introductiontobusiness\/wp-json\/pressbooks\/v2\/chapters\/2984\/metadata\/"}],"wp:attachment":[{"href":"https:\/\/content.one.lumenlearning.com\/introductiontobusiness\/wp-json\/wp\/v2\/media?parent=2984"}],"wp:term":[{"taxonomy":"chapter-type","embeddable":true,"href":"https:\/\/content.one.lumenlearning.com\/introductiontobusiness\/wp-json\/pressbooks\/v2\/chapter-type?post=2984"},{"taxonomy":"contributor","embeddable":true,"href":"https:\/\/content.one.lumenlearning.com\/introductiontobusiness\/wp-json\/wp\/v2\/contributor?post=2984"},{"taxonomy":"license","embeddable":true,"href":"https:\/\/content.one.lumenlearning.com\/introductiontobusiness\/wp-json\/wp\/v2\/license?post=2984"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}