Small Business and Small Business

A conversation recently with my insurance broker had me highlighting a problem in the economies of Canada and the US, to which policy is seemingly being addressed, but in reality is not. We are aware, of course, that small businesses play a significant role in our economies, employing large numbers of people and contributing in various ways to research and innovation.

However, what the policies fail to address is the fact that there are two types of small businesses, and their needs are not the same.

On the one hand, there’s the small store which has been operating for many years, employing a dozen people, and churning over annual gross revenues of $2,000,000. Certainly small when compared to large corporations who measure annual revenue in the billions of dollars, these stores are actually not the real small businesses in the economy.

The real small businesses are those built of a couple people just starting out. These are the people who are funding their business out of their savings, perhaps starting with as little as $100 to their name. They grow organically, slowly building up revenues while trying to keep costs down out of necessity. The per capita revenues in their case is often higher after an initial growth stage, since they are forced to keep costs down to hiring people, not buying things.

These companies look at an expense of $1,000 as being a lot of money, and are conceived under the umbrella of austerity. Government funds for growth and development? Sorry, these guys aren’t big enough. Bank loans? Sorry, we only need $50,000 and the bank’s minimum loan is $100,000, which we can’t afford.

If the governments really want to help the economy by helping the small businesses, they should be looking at how to help businesses calling themselves startups, not businesses labeled as small businesses.