are one-site businesses with sales between $25,000 and $100,000. Growth levels off after
operations settle into a consistent, money-making pattern, generating enough income to provide a
living for the owner and family.
References
Essay Learning Objective:
01-02 Differentiate
between small
businesses and
high-growth
ventures.
If you were planning to start a business and someone told you “Ninety percent of all new
businesses fail within two years,” how would you reply? Do 90 percent of companies fail in the first
two years?
You could reply that the statement that 90 percent of new businesses fail within two years is wrong
in two major ways. First, the percentage is wrong. Studies show that nearly 70 percent of
businesses are still going after two years, just over 50 percent are still going in five years, and
nearly 35 percent make it past ten years, with 25 percent surviving fifteen years. Second, looking at
the businesses that close, the vast majority close but do not fail. Only one firm in three that closes
was considered financially unsuccessful by its owner.
References
Essay Learning Objective:
01-03 Dispel key
myths about small
businesses.
95.
Award: 1.00 point
Identify and briefly describe the four elements needed to get your business started (BRIE). Is one
element more common than the others?
In order to start a business, four elements must come together—boundary, resources, intention, and
exchange. This is referred to as the BRIE model.
A business needs the benefits of a boundary—something that sets it up as a firm. Having a
boundary gives a place to locate and protect the resources gathered for the business. Resources
include the product or service to be offered, informational resources on markets and running a
business, financial resources, and human resources such as the time to devote to the business.
Intention is the desire to start a business and is the most frequently occurring element of the BRIE
model. Exchange refers to moving resources, goods, or service to others, in exchange for money or
other resources. If the firm doesn't exchange with its environment, there is no "business" taking
place.
References
Essay Learning Objective:
01-04 Identify
actions key to
becoming a small
business.
96.
Award: 1.00 point
What is the role of small businesses in creating new jobs?
Small business has added tens of millions of jobs. In the latest statistics, small businesses created
nearly 66 percent of the new jobs created since 2000. Small business start-ups in the first two years
of operation accounted for virtually all the net new jobs in America. Small business is the engine of
job generation, but it is important for existing jobs, too. Small businesses employ more than half of
all Americans, providing wages, salaries, and the taxes those working people pay the government.
Small businesses are also key employers because they are more willing than most large businesses
to offer jobs to people with atypical work histories or needs, like people new to the workforce,
people with uneven employment histories, and people looking for part-time work. These
employment issues are at the core of what makes small business attractive to local and state
governments.
References
Essay Learning Objective:
01-05 Recognize
how small
businesses are
important to our
economy and your
community.
97.
Award: 1.00 point
Briefly describe the opportunities small businesses present for the owner, the local community, and
the economy in general.
People who own their own business are presented with tremendous opportunities for getting into
the economic mainstream of American life, especially attractive to people who have trouble fitting
into existing businesses: people with innovative ideas, immigrants, people with restrictive
schedules, and even people who need a second chance. Small businesses offer communities
another type of opportunity—the opportunity to enjoy goods and services. A small grocery,
drugstore, hardware store, or gas station can adapt to local needs while larger chain stores could
not. For a small town or neighborhood to stand on its own, it needs a variety of businesses. Finally,
small businesses provide unexpected opportunities to large businesses and high-growth firms.
Without small businesses offering supporting services or offering to subcontract at low cost to the
high-growth ventures and big businesses, those larger companies would lose profitability. In
addition, big business depends on small business as a source of key ideas for new products. For
both of these reasons, small businesses are vital to the general economy.