Importance Os the Small Busines

The purpose of this paper is to explain what small business are, their importance in today's expanding economy and understanding how changing technology affects their operations. In the last years, the internet has brought small businesses a lot of innovative procedures that can be used to improve products and services, reduce costs and also have access to more information.

My special interest in this topic is due to the important role of small business in my home country economy, Ecuador. Although small businesses constitute the largest part of the economy (most of them are family owned enterprises), the advantages of internet as a business tool have not been developed yet. The use of internet is mainly limited to entertainment and researching purposes but definitely there is still a lot to learn about it can be used for business purposes.

This paper id divided into three main parts. The first part gives details about what is consider being a small business, the organizations that regulate small business and the way they are measured; also, defines the importance of small businesses in the U.S. economy; and finally, determines how small business are traditionally managed. The second part is concerned about the evolution of internet and its improvements. The third part is the core of the paper because it links internet and small businesses and they way internet can be used as at advantageous tool in today's businesses.

1.SMALL BUSINESS

1.1.What is a small business?

The Small Business Act states that a small business concern is "one that is independently owned and operated and which is not dominant in its field of operation." The law also states that in determining what constitutes a small business, the definition will vary from industry to industry to reflect industry differences accurately.

In the Small Business Act of July 30, 1953, Congress created the Small Business Administration (SBA), whose function was to "aid, counsel, assist and protect, insofar as is possible, the interests of small business concerns." The charter also stipulated that the SBA would ensure small businesses a "fair proportion" of government contracts and sales of surplus property to maintain and strengthen the overall economy of the Nation.

The Small Business Administration's Small Business Size Regulations implement the Small Business Act's mandate to SBA. In order to establish size standards the SBA considers economic characteristics comprising the structure of an industry, including degree of competition, average firm size, start-up costs and entry barriers, and distribution of firms by size.

It also considers technological changes, competition from other industries, growth trends, historical activity within an industry, unique factors occurring in the industry which may distinguish small firms from other firms, and the objectives of its programs and the impact on those programs of different size standard levels. As part of its review of a size standard, SBA will investigate if any concern at or below a particular standard would be dominant in the industry. SBA will take into consideration market share of a concern and other appropriate factors which may allow a concern to exercise a major controlling influence on a national basis in which a number of business concerns are engaged. Size standards seek to ensure that a concern that meets a specific size standard is not dominant in its field of operation.

Finally, as part of its review of size standards, SBA's Office of Size Standards will examine the impact of inflation on monetary-based size standards (e.g., receipts, net income, assets) at least once every five years and submit a report to the Administrator or designee. If SBA finds that inflation has significantly eroded the value of the monetary-based size standards, it will issue a proposed rule to increase size standards .

SBA has also established a table of size standards, matched to North American Industry Classification System (NAICS) industries to ensure and reflect the size difference between industries.

1.2.Small Businesses importance on the overall economy

Small businesses play a crucial role in the economic development of The United States. The report of the Office of Economic Research (OER) within the Office of Advocacy indicates that small businesses compromise more than 99 percent of all employers, 51 percent of private sector employment, 52 percent of the U.S. gross domestic product, and are the sources for two-thirds of net new jobs.

In 2002, the number of small businesses in the United States reached 22.9 million businesses. The number of small business has relatively kept unchanged over the years due to the transition of small firms into large corporations and the shrinking of large firms into small businesses -mainly, as a result of a recession period.

1.3.Traditional Management of Small Businesses

Traditional small businesses such as milk bars, pubs, small independent hotels and newsagents, are now having to work much harder and smarter simply to maintain their operations. They face a rapidly changing environment, with new and altering regulations. Many of these small businesses are family owned and have generally survived on hard work and long hours. Proprietors of such small businesses are often generally unable to avail themselves of business planning services that might help them successfully refocus and update their business skills.

In order to successfully manage a small business the owner should have clear business plan. The first step in the business plan is to define the business, establishing clearly what is the product and service, what is the industry and what is your target market. A second step is to determine the marketing capabilities; this includes the benefit that the product or service brings to the user, evidence of marketability, widespread marketability and selling ability. A third step is management capabilities, which is the most important step in the business plan because this includes the actual knowledge of the business and the people that is going to be in charge of running it. Managers of small businesses are not only required to know about economic and management but also to have an obsession for opportunity, be comfortable with dealing with uncertainty, and have the flexibility to admit errors and command changes in strategy. Finally, the business plan will be complete with the financial estimations that show the expected performance of the business, allowing the managers to control the productivity of the employees by comparing the actual performance with the expected o budgeted one . As stated by Eduardo Da Costa in his book Global E-Commerce