Risks and benefits of starting a new business

Unfortunately two out of three new businesses fail within their first four years. According to a President’s report, The State of Small Business, the share of small business output has been declining. Large companies, in part due to their efficiency, have taken over markets that previously belonged to small businesses. Nevertheless, estimates showed that small businesses, defined by the International Revenue Service as businesses having fewer than 500 employees, accounted for 39% of all the goods and services produced in America.

According to the report, small businesses face many other problems. Bad economic times affect small business more than they do big business. In addition, small business profits tend to fall faster, and small businesses are more likely to fail. According to the President’s report, ‘The larger the firm, the better the chance it has of surviving’. The report also said, ‘A firm with 21-50 employees has 54 % chance of surviving four years. A firm of under 20 employees has 37 % chance of surviving four years.

What are the problems that face small business now? The National Federation of Independent Business reported that the four top problems facing small business at that time were taxes, low sales, the high cost of borrowing money and competition from other businesses. On the bright side, the innovativeness of entrepreneurs in small businesses is likely to enable small business to react quickly and successfully to changing times. The report points out that 80% of new jobs are provided by businesses with 100 or fewer employees. Small businesses produce twice as many innovations per employee as larger firms. Those innovations are the source of new jobs and new opportunities for entrepreneurs.

Where is entrepreneurship most likely to be welcomed? The answer is in small business. In fact the word ‘entrepreneur’ is frequently used to define a small business owner, since the owners in small businesses usually carry out many of the functions of those businesses themselves. In large business the tasks of organizing and operating are done by many hired managers. Large and small businesses are organized in different ways to meet their objectives.

UNIT 4