Currently, there is no such economic market in the country that would not have small enterprises. This sector, nicknamed the backbone of the economy, plays a role, which is important for the development of the national economy. He makes a direct contribution to the formation of gross domestic product and taxes. It creates new jobs, stimulates competition and export growth, and also fosters innovation and technology. This is only a small part of the benefits of a small business.
The economic growth
Compared with large companies, the advantages of a small enterprise are greater flexibility, a more effective response to changes in the business environment and the market. This is why investments made in this sector generate higher returns. At the same time, the corresponding sector of the national economy offers tangible opportunities for realizing the creative abilities of the entrepreneur and his leadership potential. Small businesses are the most common form of organizational business. This concept follows from the fact that the development of this sector ensures the growth and prosperity of the standard of living of the population. Turning to this sector, P. Druher states: “Small business is the main catalyst for economic growth.”
Growth factors
Thus, these advantages of a small enterprise contribute significantly to the achievement of the fundamental goals of the national economy. In most developed countries, small enterprises are growing steadily due to the following factors:
• An increase in the number of unemployed.
• Diversity and differentiation of demand.
• Changes in the organizational structure of large enterprises.
• Reorientation of the economy towards a variety of services.
• Globalization of the national economy.
• The policy of Western governments in this area of support for small enterprises.
All these factors contributed to the growth of the role, importance and advantages of small enterprises in the economies of countries, namely:
• Stimulating the growth of production and the economy.
• Contribution to the creation of new jobs.
• Diversification of products and services to the market.
• Improving product quality and satisfying consumer demand.
• Autorealization of different people, ensuring their economic freedom.
• Improving the welfare of the population.
• Profitable direction of investments from own sources.
• Quick adjustment of the range of services according to market demand.
• Entrepreneurship training.
• Formation of a middle class of owners, which will ensure stability in society.
Material resources
So, from what has been said, first of all, the register of small enterprises helps to improve the economic situation and stimulates its growth in a relatively calm way, without inflation. This growth comes as implicit government revenue (through tax). Small enterprises also make a significant contribution to the variety of products and services, the growth of their quality. And as a result, customer satisfaction. Having a register of small enterprises, financially, they cannot produce homogeneous goods in large quantities, so they use free places in the market or create new niche markets. It offers a range of diverse products in accordance with the requirements of various consumer groups.
Niches and Markets
Today in the world there is support for small businesses and a tendency to abandon mass production and large batches in favor of small series or custom production. In the USA, Germany, Italy, France, Japan, approximately 80% of the production volume is represented in an amount from 50 to 300 units. Such orders can only be satisfied by small enterprises, since a large enterprise producing small quantities of goods loses profit due to high costs. Small enterprises have the ability to change structure after some time, much faster than large enterprises. An important role is played by the support of small businesses in the field of innovation. Although they are greatly influenced by technological development, cooperation with large enterprises and research centers is currently producing impressive results. Many great innovations of the century have been developed as part of small enterprises. For example, the production of antibiotics, insulin, contact lenses, fiber optics, a Polaroid computer personal camera, etc. Thus, small enterprises concentrate on all their creative and material potential in developing one or two innovations. A lot depends on the type of activity of small enterprises in the field of foreign economic relations. They make this innovation process more productive than a large enterprise.
Employment centers
For a long time, analysts believed that the balance sheet for small enterprises is the prerogative of large enterprises. But this is far from the case. With the globalization of economic relations, the creation of a single market, it was found that accounting in small enterprises is beginning to occupy an increasingly important place. Mostly in Germany, the Netherlands, Italy, Belgium and Japan. Small enterprises account for 35-40% of the total number of exporting firms. In the USA, the indicator is slightly lower - 30-35% of all exporting companies. The increase in the number of exporting small enterprises leads to the activation of the entire external trading system, expanding the range of goods offered and accelerating their repair. Employment centers make a special contribution to the reporting sector of small enterprises, especially in countries with developed market economies. So, every year in the United States, three out of four newly created jobs are in the small business sector. Thus, they provide millions of people with the means of subsistence, and the state accumulates billions of dollars and euros in taxes from the national budget.
Definitions and Standards
Features of a small business play an important role in the economy, representing a source of ability for entrepreneurship, innovation and job creation. To better understand the phenomenon of small enterprises, it must be theoretically analyzed. But no matter what concept is used, it is the criteria that are considered as the basis for identifying small enterprises: the number of employees, the size of assets, the volume of production, achievements in areas of activity, or a combination of these criteria.
Capital and activity
In the US, there are several definitions of small business. The highest quality definition is approved by the Committee for Economic Development Standards. According to him, a business is considered to be an object in which at least two of these conditions are met:
- Management is independent. As a rule, managers are also owners.
- Capital is held by one person or a small group of people, business owners.
- The area of activity is usually local.
- The business is small compared to one of the largest enterprises in this industry.
In order to estimate the number of small enterprises and keep records, in addition to the qualitative definitions mentioned above, in the USA quantitative determination is used.
Staff and staff
In Japan, the attributes and composition of a small business are calculated by the amount of capital, the number of employees and branches.
Often the criterion of “number of employees” is characteristic of countries with economies in transition. In Hungary, for example, companies with staff of up to 100 people fall into the "small enterprises" category. In Ukraine, economic agents are appointed in the category of small enterprises, if the number of employees does not exceed another maximum level of the industry:
• industry and construction - up to 200 people;
• other industries - up to 50 employees;
• scientific services - up to 50 employees;
• unproductive sphere - up to 25 people;
• retail trade - up to 15 people.
In Belarus, the criterion for the number of employees is applied similarly, having a slight differentiation on a particular branch:
• industry and transport - up to 100 people;
• agriculture and science - up to 60 people;
• construction and wholesale - up to 50 employees;
• other industries, catering, social services, retail trade - up to 30 people;
• other sectors of the non-production sphere - up to 25 employees.
In addition to the criterion of “number of employees”, there are others that make it possible to clearly represent the size of enterprises: the value of assets, the amount of registered capital, the volume of production, and net profit. In Kazakhstan, the small business category includes enterprises whose assets do not exceed 3 million US dollars. In Japan, companies whose capital does not exceed 100 million yen can apply for tax incentives for small businesses.
State and Capital
In some countries, a set of criteria is used for this. In Bulgaria, for example, firms fall into the category of small enterprises, the number of employees with no more than 30 people and the registered capital of up to 3 million. Other states use a wider list of criteria from which the entrepreneur can choose the most convenient for himself. For example, the following conditions must be considered:
- assets below 1.5 million euros;
- turnover - not more than 3.5 million euros;
- the average number of employees and government employees is up to 250 employees.
Government programs
In Germany, each state program is focused on supporting a fairly limited group of small businesses. Accordingly, each program offers its own criteria for small enterprises, which must be followed in order to receive certain benefits. In most countries there is no single definition of small and medium enterprises.
Program framework
The criterion most often used in differentiation is the number of employees, in accordance with which the following types of enterprises arise:
- microenterprise: 1-9 employees;
- small business: 10-49 employees;
- medium-sized enterprise: 50-499 employees.
In Indonesia, enterprises are classified as follows:
- craft enterprises: 1-4 employees;
- small enterprises: 5-19 employees;
- medium-sized enterprises: 20-99 employees.
In Singapore, small business is defined as an enterprise that employs 50 people. In addition, we find such a definition in most African countries. In the Philippines, small businesses employ between 5 and 99 people.
The European Union, since its creation in 1956 by the Treaty of Rome, has warned of the importance of developing these enterprises. And year after year, the foundation, operation and development of this category of enterprises is gradually becoming more and more professional, with a direct impact on the economic and social plan of countries.
By the middle of the last decade, the following classification of small enterprises was most often used:
• 1-9 employees - microenterprises;
• 10-99 employees - small enterprises;
• 100-500 employees - a medium-sized enterprise.
Economic impact
The cash balance limit for small enterprises is set differently each year. This is the amount that can remain in the store or other point of content. After the accumulation of the extreme value at the cash desk, all the money should go to the bank.
Small businesses include companies that have a net annual turnover of less than 50 million euros. Thus, small enterprises are those that achieve a net annual turnover of about 25-40 million and hold total assets of up to 10 million. And how are things in different countries?
- In Romania also, small enterprises can have a net turnover of up to 50 million.
- In Moldova, the circulation of funds, the volume of which does not exceed 30 million, can be carried out in the small business sector.
So, although various criteria for assessing the small business sector are known in the literature, the decisive role belongs to national legislation, which is based on the characteristics and traditions of the economy and determines the criteria for determining these forms of business.