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Small Business

A privately owned corporation, partnership, or sole proprietorship that has fewer employees and less annual revenue than a corporation or regular-sized business.

Business Glossary provided by


A small business is typically characterized by its independent ownership, limited workforce, and lesser revenue compared to larger corporations. The definition of "small"—including the number of employees, revenue, and operational scope—can vary by country and industry. Small businesses play a crucial role in the economy, driving innovation, employment, and community development.

Context of Use:

The term "small business" is commonly used across various sectors, including retail, services, manufacturing, and technology. It is prevalent in discussions about economic policy, entrepreneurship, business strategies, and employment practices. Governments often create specific support programs, tax incentives, and regulatory frameworks tailored to small businesses.


Understanding the concept of small business is essential for recognizing the diverse economic activities that characterize smaller scale enterprises. These businesses often serve niche markets or local communities and provide a high level of customer service and personalization. They play a significant role in job creation and are a primary driver of innovation and competition in many economic sectors.


  • Local Bakery: A local bakery serving handcrafted breads and pastries operates with a staff of ten people and annual revenue below $500,000. It contributes to the community by providing local employment and participating in town events.

  • Tech Startup: A tech startup with 30 employees that develops mobile apps for managing personal finances, generating less than $2 million in revenue annually. This startup thrives by addressing niche market needs and competing with larger firms through innovative solutions.

Related Terms:

  • Entrepreneurship: The activity of setting up a business or businesses, taking on financial risks in the hope of profit.

  • SME (Small and Medium-sized Enterprises): Businesses whose personnel numbers or revenues fall below certain limits, offering broader classifications that include both small and medium-sized businesses.

  • Microenterprise: A subset of small businesses, typically defined as having fewer than ten employees, often requiring less capital to start and operate


What are the benefits of owning a small business?

A: Small business ownership offers flexibility, the potential for personal fulfillment, direct impact on local communities, and the ability to respond quickly to market changes.

What challenges do small businesses face?

A: Challenges include limited access to capital, high competition, regulatory burdens, and vulnerability to market fluctuations.

How are small businesses supported by the government?

A: Governments may offer tax incentives, grants, subsidies, and specific training programs to support small businesses, particularly in areas of innovation and export.

What is the importance of small businesses to the economy?

A: Small businesses are vital for economic growth, innovation, and diversity. They provide a substantial number of jobs and serve as a foundation for larger economic developments.

How do small businesses contribute to innovation?

A: Small businesses often drive innovation by introducing new products and services to the market, exploiting niche markets, and adapting quickly to technological changes. Their smaller size allows for more agile decision-making processes and a closer relationship with customers, which can lead to more personalized and innovative offerings.

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