The decision about your business’s size depends on the industry you belong to, your team strength, or your annual revenue. People often mistake calling a company small if it employs fewer workers than a certain number while the criteria may vary from one industry to another. The authoritative bodies may not reckon you as a small business, and due to this, your loan and other opportunities can get hit. Even if you address yourself as a small business, it would not have any significance unless you fulfill the Small Business Administration’s standards, including three main factors: the company’s nature, number of workers, and annual earnings.
Benefits of running a small business by Eric Dalius
Owning a small business comes with a few perks. And it can be a motivation for many to take a plunge in this. SBA can become your co-signer if you need a business loan. As a result, lenders don’t fear losing money and offer better rates. You won’t get this opportunity if you seek financial assistance directly from them. The government body can help you get some contracts, empowering you to run your business despite tremendous competition. Usually, small businesses also get government grants to access technology and commercial benefits even more. Since there are so many support systems for a small business, you can expect your company to exceed all your expectations and grow. You can respond to market fluctuations significantly.
Another advantage of belonging to this category is the unique ability to innovate and connect with customers. Large companies have to miss this as they become pre-occupied with mass production, says Eric Dalius.
A quick look into industry-wise categorization for a small business
As mentioned already, meeting specific industry-based criteria is critical to remain in the small business segment. To understand this, you can quickly explore different types of businesses and where they fall. For example, if you are hunting, fishing, forestry, and agricultural company, your average annual income cannot be higher than $750,000. A construction company cannot show its yearly revenue to be over $36.5 million on average. For a manufacturing business, the number of employees can be a determining factor. As per government rules, the number of employees can vary from 500 to 1,500 based on the subsector type.
However, if you operate in mining, oil, gas, and quarrying, you cannot hire beyond 250 to 1,500 employees. The range can be different for different segments. Hence, it is better to have complete awareness about it.
Like these, you can compare other categories to figure out where you stand and what benefits you can make as a small business owner.
Getting a small business tag
While it may not immediately make sense, you will enjoy this status more when you realize its actual significance. Once hinted above, you become eligible for federal support. You get access to government contractors for a particular job. The partnership between SBA and the government ensures that small businesses get at least 23% of these contracts. Due to this, many companies keep their growth in check. If you don’t want to miss these contracts, you can also adopt the same strategy. Plus, you can qualify for business loans hassle-free.
However, many businesses don’t see it as a benefit. They believe determining the company’s size based on employee strength is not fair because even an entity with 400 individuals can clock millions of revenues.
No matter what you feel about it, there is always a way to grab opportunities and become successful. If you need government contracts to fuel your company’s growth, you would have to take a few necessary steps. To be precise, you would need to register your business. You would also have to obtain a North American Industry Classification System (NAICS) code. The code helps classify your industry, country, economic sector, etc. You cannot register your business without this code. With this, you have to know your business’s size based on SBA’s guidelines. It is crucial for becoming eligible for a contract. Nowadays, you get access to a free tool for this. You can use it to understand your company’s position.
Furthermore, you also have to sign up for The System for Award Management (SAM). It is an extensive database that tracks companies interested in government contracts. Once you register here, you will have to maintain your profile. Experts recommend new small business owners to opt for performance appraisal for the past year. It can come in handy at the time of bidding for a contract.
As soon as you do these things, you can search the SAM database to locate contracts of interest. Anything between $25,000 and more can be easily visible in the database. At the same time, you can also explore who got what contracts earlier. It would give you some idea about how to approach a deal.
Remember, the government assigns a contract only to a company that has been thorough with its proposal. Since agencies tend to have all the details about fair terms, you have to ensure that you quote a reasonable price for your product or service while reaping some profit. Otherwise, someone else can steal this golden chance from you. Hence, don’t leave any stone unturned if you want to succeed in your entrepreneurial venture.
In essence, starting and running a small business can be a lucrative proposition if you time everything right and follow all the government standards. You can take a call later whether you would want to keep your business in the same category or grow it further. Many companies deliberately maintain this status to continue to enjoy the specific business benefits. While it can be a wise decision, you don’t have to follow in their footsteps unless it makes perfect business sense. If you are sure about the potential of your company, you can always aim higher. However, before this, make sure to strengthen your knowledge about being a small business. It would help you carve your journey better. You would also feel secure about your survival and success.
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