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Chapter 5-adm1300.docx

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Chapter 5What Is a Small BusinessHow can you tell a small business from a large one The definition varies depending on the source but Statistics Canada defines a small business as an independent business having fewer than 100 employees and 3revenues not more than 2 millionNutrisoya is a Quebecbased manufacturer of tofu and soy milk It sells products under the brand name Natura The company is making products that meet North Americans growing demand for natural and healthy foods and beverages Today this industry is valued at more than 4 billion in revenue 10 times what it was 15 years ago When the company was acquired in 1988 its revenue was only about 400000 That made it a small business by Statistics Canadas definition Today Nutrisoyas revenue is more than 30 million annually The firm is both a small business and a midsized business Its revenue places it above the cutoff revenue for small businesses but its 20 employees fall within the definition for a small company Many businesses fall into this sort of hybrid definition when trying to classify the business one requirement conflicts with another requirement Whether a company is small or mediumsized does not really matter unless the firm is applying for work grants 4or loans Then a means test is used to decide which firms qualify Government agencies offer benefits to help small businesses compete with larger firms Thus smallbusiness owners will want to know whether their companies meet the standards for being a small business If a company qualifies it may be able to receive government loans or take part in government programs that encourage purchasing goods and services from smaller suppliers Some companies that receive such assistance might one day expand to other areas of the country and eventually become a larger businessTypical small business venturesSmall businesses have always competed against each other and against some of the worlds largest organizations In the past 15 years many small businesses have closed because larger firms have bought out the small independent businesses and replaced them with larger operations For example we have fewer independent bookstores and hardware stores because bigger chains such as Chapters Indigo Books and The Home Depot have increased the size and number of their stores Some businesses are not very likely to be gobbled up by bigger firms businesses that sell personalized services rely on certain locations and keep their overhead costs lowSmall businesses account for more than twothirds of employment in five Canadian industry categories noninstitutional health care construction accommodation and food forestry and other services Approximately 25 percent of small businesses operate in Canadian goodsproducing industries 6the remaining 75 percent operate in service industriesSmall firms have created an important space for themselves they provide busy consumers with customized services that range from petsitting to personal shopping These businesses meet the needs of individual customers in a way that big firms cant Small business also plays a major role in agriculture Canada has 68 million hectares of farmland Most of this land is owned by large corporate farms but most of Canadas 327000 farms are owned by individual farmers or their families The family farm is a classic example of a smallbusiness operation It is independently owned and operated It also employs a limited number of 7people including family membersFigure 51 shows the distribution of business ownership in the goodsproducing and serviceproducing sectors and by numbers of employees The indeterminate category consists of incorporated or unincorporated businesses that do not have a Canada Revenue Agency payroll deductions account The workforce of such businesses may consist of contract workers family members andor owners About 25 percent of all business establishments produce goods the remainder provide services Small firms make up 98 percent of goodsproducing businesses and 98 percent of all serviceproducing businesseshomebased businessesfirms that operate from the business owners residence oPeople often choose to operate homebased firms to have more control over both their business and their personal time oPeople who run homebased businesses can be morning people or night people but they can usually choose to work when it suits them best oA homebased business is easier to run because of access to the Internet and communications devices such as the BlackBerry and other smartphone technology oPeople who run homebased businesses dont need to worry about overhead costs such as leasing office or warehouse space The downside is isolation and less visibility to customersexcept of course if customers visit online Those customers dont care where your office is locatedMany small businesses become more competitive because of the Internet oThe Internet doesnt guarantee successthere are so many websites that a small firm needs to find ways to make its online presence effective oSetting up a website is generally less expensive than opening a retail store oA website can also reach a wider range of customersContributions of small business to the economy
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