Most businesses in the United States are small businesses. There are about 23 million businesses in the United States and only about 14 thousand of them are considered medium or large. There are many reasons in creating a small business as well as advantages and disadvantages. In the coming paragraphs, I would like to share with you some of the reasons for starting a small business and the advantages and disadvantages when creating these businesses. To begin, small business is defined as an independently owned and operated business made to make a profit and is not dominant in its field.
Most people start a small business because they want to earn a profit or be their own boss. It is also one of the easiest forms of business to create because compared to other forms of business; small businesses require only a low initial investment and some special skills or knowledge. The top three fastest growing types of small businesses are retail establishments, transportation services and meat markets and freezer provisioners. Most people want to start a small business because of the advantages it offers. There are many advantages in starting a small business, which are not found in other forms of businesses.
For starters, a small business entrepreneur builds a special relationship with its customers and employees. This can be used as a major competitive weapon, one that larger firms try to match but cannot. Furthermore, close relationships with employees can often help in retaining them for a longer period of time. Another good advantage small businesses have over large companies is the ability to adapt to change. For example, if an owner of a small company sees that teenagers love a certain product, he can sell that particular product right away. In a large corporation, to sell the same product it must go through different managers and departments before it goes into production.
Finally, small businesses offer their owners independence meaning that they do not answer to anyone and can do whatever they like pertaining to the business. Even though the advantages sound very appealing, we cannot ignore the potential risks and disadvantages that small business offer. The number one problem of starting a small business is the potential risk of failure. Around 70 percent of all new businesses die and go bankrupt within the first 5 years. Older firms can be badly hit with economic problems and recessions because they do not have the money to stay in a difficult period for a long time.
Another major disadvantage is the limited ability of raising capital. Because banks are very hesitant in lending loans to small businesses, financing for a business comes out of the owner's own pockets. So if a business fails, an entrepreneur could loose all his life savings or a great amount of money. As we have seen, starting a small business can be very rewarding. Being your own boss and doing things your own way sound very appealing, but we cannot ignore the risks involved. Most people start their own business to be their own boss and to make a profit, but 2 out of 3 businesses do not survive the first five years of being in business.
It is very challenging to start your own business, but if a person hits it off he can be pretty well established economically.