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The Importance of Small Businesses in Our EconomyProviding 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 economyThe Importance of Small Businessesin Our Economy (cont.)Providing competitionSmall firms can compete with large firms, forcing the larger firm to become more efficient and responsive to customer needsFilling 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 businessesThe Pros and Cons of SmallnessAdvantages•Personal relationships with customers and employees•Ability to adapt to change•Simplified recordkeeping•Independence•Advantages of sole proprietorshipsKeeping all profitsEase and low cost of going into businessKeeping business information secretSources of Capital for EntrepreneursDeveloping a Business PlanBusiness plan—a carefully constructed guide for the person starting a business
Three basic purposes •Communication•Management•PlanningBanking 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 PlanThe Small Business AdministrationA 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 publicationsThe Small Business Administration (cont.)SBA financial assistanceoRegular business loansLoans made by private banks but partially guaranteed by the SBAoSmall-business investment companiesVenture capital: money invested in small firms that have the potential to become very successful