5 characteristics that aptly describe small businesses

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The United States Small Business Administration’s (SBA) Office of Advocacy asserts that small businesses make up 99.7% of all U.S. firms. It’s therefore safe to say that small businesses are the economy’s driving force.

Starting a small business is basically about setting up shop, finding clients and earning money. This is true for whatever form of business you plan to start.

Several more traits are also used to define small businesses as follows:

The costs of setting up a small business vary but are on average quite low

1. Low startup costs

Depending on the specific type of small business, startup costs are typically quite low.

A retailing business doesn’t have to start big; simply buying the initial inventory and renting a suitable space will do. A consultancy service doesn’t have to start in a plush office with a flashy address; starting out in your home office where the overhead costs are minimal is certainly prudent.

This article will give you a glimpse of the cost required for startups in different industries.

Majority of small businesses have 10 or less employees

2. Just a few employees

It’s typical of a small business to have a single worker – the owner. For this reason these businesses are commonly referred to as “one-man-shows”.

In fact, according to this 2004 SBA survey, 59% of startups had zero employees. 91% of all employer firms were startups with 10 or fewer employees and these were responsible for 61% of employment.

Nevertheless, as operations grow you may need to hire a number of employees. To keep your operating costs low you may, like many other small business owners, find it feasible to hire independent contractors or freelancers.

Small businesses find and serve target markets

3. Small market share and intense competition

A small business serves just a small portion of the market; what really matters is its target market. This is as compared to the significantly larger shares of the same market that corporations and larger businesses can control thanks to their bigger capacities.

Also, since there are a huge number of small businesses that need to compete for business opportunities in the same market, competition is rife. This typically results in product/service innovation and differentiation.

4. Limited budgets and funding

As compared to larger firms, small businesses typically operate with limited budgets. With their limited finances these enterprises have little or no choice but to keep their costs of doing business low. Cost-efficiency is the name of the game for small business owners.

Thanks to the internet small businesses now have a global reach

5. A single location

Most small businesses operate from a single location; not many of these businesses have branches or outlets in multiple cities or states.

Also, the rising prominence of home-based businesses means that a significant number of enterprises are now operating without formal business facilities. In the above survey 50% of small businesses were home-based.

To their credit, many small businesses now have a global reach thanks to running internet-based operations.



  1. Hey Samuel,

    Great post and it is relevant to me for the future. My start up costs will only be presentation materials. And you are so right that small businesses cater to a small fraction of their niche. Initially anyway.

    I find a small business exactly like blogging. First you have to find your people, then you have to develop a reputation as the go to person, then word and mouth works in your favour. So it takes time. But I believe if you believe in your product there is no competition only a waiting game with hard work.

    I will be starting from a single location but all my work will be done over the internet and Skype. I can’t wait to challenge myself in this area. It is a completely new step for me – but one worthy of making.



    1. Hi Rachel,

      Welcome to this space again and apologies for this belated reply. I like your analogy; its true that starting a small business and a blog is kind of similar. Both are absolutely challenging and typically take time before they can be considered successful. The waiting part is really hard work but I guess things have to be this way so that we can really appreciate the eventual success. I’ll be happy to follow your progress…I’m sending a ton of good luck your way.



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