The importance of small businesses in our economy

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The Importance of Small Businesses in Our Economy Providing technological innovation Innovation among small-business workers is higher than among workers in large businesses Small firms produce 2.5 times as many innovations as large firms relative to the number of persons employed More than half of the major technological advances of the 20th century originated with individual inventors and small businesses Inventions may spark new industries or contribute to established industries
The Importance of Small Businesses in Our Economy (cont.) Providing employment Small firms hire a larger proportion of younger and older workers, women, and part-time workers Small businesses provide 67% of workers with their first job and initial job skills Small businesses represent 99.7% of all employers and employ over 50% of the private work force Small businesses provide two-thirds of the net new jobs added to the economy The Importance of Small Businesses in Our Economy (cont.) Providing competition Small firms can compete with large firms, forcing the larger firm to become more efficient and responsive to customer needs Filling needs of society and other businesses Small firms can meet the special needs of smaller groups of customers Small firms can act as specialized suppliers of goods and services to larger businesses The Pros and Cons of Smallness Advantages Personal relationships with customers and employees Ability to adapt to change Simplified recordkeeping Independence Advantages of sole proprietorships Keeping all profits Ease and low cost of going into business Keeping business information secret Sources of Capital for Entrepreneurs Developing a Business Plan Business plan—a carefully constructed guide for the person starting a business
Three basic purposes Communication Management Planning Banking officials’ and investors’ questions What is the nature and mission of the new venture? Why is it a good idea? What are the goals? How much will it cost? Components of a Business Plan The Small Business Administration A governmental agency that assists, counsels, and protects the interests of small business in the U.S. SBA management assistance Management courses and workshops Service Corps of Retired Executives (SCORE) Help for minority-owned small businesses Small-business institutes (SBIs) Small-business development centers (SBDCs) SBA publications The Small Business Administration (cont.) SBA financial assistance o Regular business loans Loans made by private banks but partially guaranteed by the SBA o Small-business investment companies Venture capital: money invested in small firms that have the potential to become very successful

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