Defining a small business is very difficult, but necessary. It is particularly important when discussing the needs of a small business versus those of a large enterprise, and in too many cases the line is blurred and the result is disastrous for the small business. Since many of us have sold to enterprises, we approach a needs assessment with a myriad of questions covering a slew of categories. However, if the business is “small” the number of items to check off before determining an appropriate solution should be shorter and certainly less complex.
I generally define a small business as having more than one paid employee. This reduces the range of small businesses from over 20 million (used a lot in political discussion) to around 4-6 million. The trickier question is how large can a business be and still be considered small. One would think that the Small Business Administration (SBA) would be an excellent source to address this, and since we are dealing with a government agency, one would be wrong. The SBA deems a business small based upon five factors:
- Average firm size
- Degree of competition within an industry
- Startup costs and entry barriers
- Distribution of firms by size
- Small business share in federal contracts
This allows the SBA to establish that in agriculture in order to be a small business, receipts must not exceed $750,000. However, in manufacturing and some wholesales businesses, small can be over $21 million in revenues. Furthermore, I was of the belief that small would be limited to 250 employees or fewer. Not so fast, the SBM defines, for manufacturing and certain industries (janitorial for example), that the number of employees can be up to 1500. Let’s understand that for technology companies like Broadvox, any business with 1500 employees is not small. However, when the five factors are included in the analysis, it becomes a bit clearer as to why the SBA looks at a 1500 employees business as small. Compare Broadvox to AT&T. We have over 250 employees and a pretty good base of revenue, but when compared to AT&T we are a rounding error in sizing our industry. However, we are an industry leader in the delivery of VoIP and SIP Trunks, have a national private IP network, with two Network Operation Centers, three significant offices and many remote or home workers. Our network and IT infrastructure represents a major investment in resources and engineering. All of that would never be viewed by even the most casual observer as “small”.
So, the first thing to learn in defining a small business is to not look to the government for an answer. As bureaucrats, they always over analyze and dissect the problem. We on the other hand need good rules of thumb. Mine may differ from yours, but the number of employees should range from 2-250, revenues from $100,000 to $20,000,000 and be privately held. In the case of quantity, most small businesses (90%+) have fewer than 20 employees and $2,000,000 in revenues.
It is the 20 employee company that we need to target our small business solutions toward, and that is key. Expressing an understanding for the needs of such a business, to strategically be positioned for long term success and tactically setup to generate near-term revenues, is our responsibility and doing that well will make us successful.
See you on Monday!