Why Small Businesses Need to Save the World
Why is it that Small Businesses need to save the world rather than large enterprises which typically are more famous and have more resources?
To answer this we need to analyze the differences between small and large businesses.
“Small” Business can refer to one measurement (e.g. small number of employees) but the impact of that category can be huge.
For example in Canada (and I suspect in most countries) small businesses have an extraordinary impact:
- As of December 2019, there were 1.23 million employer businesses in Canada. Of these, 1.2 million (97.9 percent) were small businesses, 22,905 (1.9 percent) were medium-sized businesses and 2,978 (0.2 percent) were large businesses.
- small businesses employed 68.8 percent of the total private labour force
- small businesses comprise between 40-50% of gross domestic product (GDP)
The Need for a Definition of Small Business
Terms and categories can seem so inadequate without definitions and explanations which we don’t always get to choose. Definitions and detailed explanations can come across as being pedantic but lack of definitions and explanations can lead to confusion and misunderstandings.
There are many definitions of “Small Business” but it helps to use official definitions from government or other primary sources in order to use their data to describe the category.
For example, in Canada, one federal government source I use is Innovation, Science, and Economic Development (ISED) Canada, Small Business Branch. In the US government, a similar organization is the Small Business Administration (SBA).
The Canadian ISED business size categories are based on the number of paid employees:
- a small business has 1 to 99 paid employees;
- a medium-sized business has 100 to 499 paid employees; and
- a large business has 500 or more paid employees.
A Better Definition of Small Business
The statistics I quote are based on ISED categories but my preference would be that the small business category would also include solo-preneurs without any employees. Solo-preneurs include self-employed and indeterminate businesses that may subcontract a lot of work but not have any employees. Since self-employed and “indeterminate” businesses are not considered to have paid employees, they are not included in the ISED statistics.
In all likelihood, solo-preneurs are more plentiful than any other category since the number of businesses declines rapidly as the number of employees increases. Micro-enterprises (1–4 employees) make up 54.9 percent of Canadian businesses. By adding those businesses with 5–9 employees, this number increases to 73.6 percent. In other words, almost three out of four Canadian businesses have 1–9 employees.
Small business in Canada looks very different compared to the corner store or independent restaurant that may come to mind. As the tech boom stretches its far-reaching tentacles across the world, there’s no set formula for small businesses anymore. Sure, there’s the standard mathematical definition of a small business—a company with fewer than 100 employees. But what constitutes a small business can take on many different forms, especially as the limits of what just a few people can achieve in a short time expands.
Take, for example, a married couple who owns and maintains a bed and breakfast. While they may hire groundskeepers, the occasional waiter, or concierge during busy seasons, B&B owners who have employees fit in closely with Industry Canada’s statistical picture of small businesses at the very minute end of the scale: They’re older, rely on the business as their sole source of income, and are motivated by the joys and challenges of being their own bosses.
Why Small Businesses Are Important
Whether it’s a young tech entrepreneur looking to grow a multinational corporation, or a couple running a bed and breakfast, small businesses rise up from communities. They carry the nation. A recent report from TD Economics estimated in the last three Canadian recessions, 85 percent of net job creation within the first two years of recovery came from small businesses.
Canadians respect this. In a 2011 survey of 2,000 adults there was remarkable consensus on the value of small businesses to the country:
- 98 percent of people said small businesses are important to the country’s future and
- 94 percent of people said small businesses are crucial to the local community.
The people running smaller companies are also a more diverse group of business leaders. Women lead one-third of the small businesses, an impressive figure when compared to the total paucity of female leadership at Canada’s largest companies.
Summary
This article identifies:
- Small businesses need to save the world
- What are small businesses
- Why a better definition of small businesses is needed
- Why are small businesses important
What problems do small businesses need to save the world from?
The simple answer is poverty but as we will see in the next blog post on business problems and opportunities there is a lot more to this question than that.