What is a small business?

@bobmnu (8160)
United States
October 17, 2008 11:31am CST
In this election we are hearing a lot of talk about small business and it's impact on the economy and how they should be taxed. According to Wikipedia: "A small business is a business that is independently owned and operated, with a small number of employees and relatively low volume of sales. The legal definition of "small" often varies by country and industry, but is generally under 100 employees in the United States" Using this definition, how big would a business have to be to generate income above $250,000. Since we now have the "Famous Joe the Plumber" I will use a skilled business to illustrate my point. In most states you have to be a licensed person or work under a licensed person to perform jobs that require an inspection or a building permit issued by the local government. Often these licenses are limited in number and you only have a few licensed contractors and they hire people to work under them. If I own a small plumbing business and employ 15 people (10 Plumbers, 2 Office workers, 2 Sales People and 1 Bookkeeper). My payroll would be (based on National averages rounded to nearest $1,000) Plumbers $51,000 with benefits $74,000 Total $740,000 Office help $31,000 with benefits $47,000 Total $141,000 Sales $51,000 with benefits $74,000 Total $148,000 Total Salary Costs $1,029,000 Hourly rate needed to be charged to cover salary $ 50 You also have to figure in the cost of supplies, trucks, tools, advertising and equipment. It does not take a very large business to generate an income of $250.000 per year. In the above example if you just had 3 plumbers and one office person to do all the billing, scheduling and answering the phone would put you over the magic number.
4 responses
• United States
17 Oct 08
This is from the Small Business Administration website. "The most common size standards are as follow: * 500 employees for most manufacturing and mining industries * 100 employees for all wholesale trade industries * $6.5 million for most retail and service industries * $31 million for most general & heavy construction industries * $13 million for all special trade contractors * $0.75 million for most agricultural industries" I guess you can say whatever you want when you are the one defining it. http://app1.sba.gov/faqs/faqIndexAll.cfm?areaid=15
@peavey (16991)
• United States
17 Oct 08
I'm glad you brought this up because I've been thinking about it, too. It doesn't take much of a business to make $250,000. Obama's tax plan will affect a lot more people than he's telling, as you said. I think your numbers are reasonable.
@tickapa (331)
• Romania
17 Oct 08
You think this is a small business? Small businesses are those that have to invest a little and win a lot (lol). What you set out here is an average business. The investment is too high and risk is the measure. Plus those figures are not a business plan, only numbers. The best selling services are that do not require money to create them. Probably sounds a bit stupid, but even so. I have an idea about such a deal, but unfortunately can not say, it would mean to stay without my idea :D As the proverb says: "Give people what they need, not what they say they need" :D
@Arkie69 (2156)
• United States
17 Oct 08
I was starting to wonder if anyone else was going to pick up on that. It doesn't take much of a small business to generate over $250,000 a year. That tells me that Obama is planning on raising the taxes on a lot more than the upper 5% like he said. The upper 5% might start a lot closer to $250,000,000 a year. I feel sorry for Obama if he does anything that will threaten the future profits of that crowd. President Nixon learned the hard way you just don't do that. Remember Nixon wanting to freeze all prices? The big investors live on inflation and you see what happened to Nixon when he tried to stop inflation. The only thing Nixon ever did that any other president had not done before him is try to stop inflation.