Companies with fewer than 500 employees are considered small businesses. They are critical to the U.S. economy. According to SmallBusiness.com there were 28.8 million small businesses in the U.S. in 2013 (the latest period for which data is available). Small businesses provided 48% of new jobs in the private sector (57 million out of 118 million employees).
Not all small businesses succeed. SmallBusiness.com gives the percentage of small businesses that survived one year in business, between 2004 and 2014, as 79.9%. About half of those survived for five years. Thirty-three percent lasted ten years.
One factor critical for the success of small businesses is financing. Despite all the media coverage devoted to sources of venture capital, VC funding is seldom available for small businesses. Fortunately, if the entrepreneur starting a business has equity available and a good credit rating there are a large number of funding sources. A lot of credit cards make available 0% introductory offers that last from a year to 18 months. There is also crowd funding, term loans, low-interest small business loans from Small Business Administration (SBA) and bank loans. Many entrepreneurs re-finance their homes, pull cash out and deduct the interest expense from their personal tax returns.
Another factor is, in my opinion, ethics. Profit drives virtually all businesses. The goal of some is to make as much money as possible without considering the effects of their actions on people or their community. In my opinion, ethically run small businesses tend to be the most successful.
A wise business owner recognizes his employees’ value. He encourages them to give their opinions, treats them with respect and rewards them for their contributions to the company. He works with integrity, eschews practices like non-payment of taxes and cheating employees and the other firms he deals with. I believe unethical businesses tend to lose over time through fines and penalties for unpaid taxes, unproductive employees and distrust by other businesses.
The ethical business owner establishes core values, goals and a mission statement. By living by them he encourages employees to follow his example. He shows his employees he values their lives as highly as he does his own by providing a safe working environment. By giving back to the community, the business draws favorable attention to itself. Helping with fund-raising activities and other types of community service makes the company a solid member of the community.
In my experience, successful business owners establish good relationships with employees, venders and others with whom they deal. They actively seek to create opportunities for others. They take control of their destiny, chose when to work and how hard and draw personal gratification and personal fulfillment from running their business.
They don’t shuffle through the day just to keep the business running another 24 hours. They devised a plan and stick to it. They are continually curious. They never quit learning. They seek new opportunities for profitable ventures and better ways to run their companies. Being tech-savvy, they rely a great deal on technology. Action oriented, they worked proactively to build their businesses. They typically see hard times as an opportunity to learn something new and move forward.
Combining ethics with success in business can sound tough but straying from the ethical path seriously harms the business in the long run. At least that’s how I see it.