Small Business Characteristics

Although the U.S. Small Business Administration (SBA) establishes industry-specific definitions, it generally considers any business with fewer than 500 employees, including self-employed individuals, to be a small business. The Federal Reserve Board’s report, “National Survey of Small Business Finances (1995),” found that small businesses were home-based 53 percent of the time. Twenty-four percent of all new businesses in 1993 began with no outside financing. The remaining 76 percent received funding from traditional sources, such as banks, credit unions, and finance companies, or from family members or credit card advances.
Although many people believe that 80 percent of all small businesses fail within five years, statistics from the U.S. Census Bureau reveal a different story. The Census Bureau reports that 76 percent of all small businesses operating in 1992 were still in business in 1996. In fact, only 17 percent of all small businesses that closed in 1997 were reported as
bankruptcies or other failures. The other terminations occurred because the business was sold or incorporated or when the owner retir