A small business is a business that is independently owned and operated, is not dominant in its field, and has fewer than 500 employees. To qualify for government programs from the U.S. Small Business Administration (SBA), revenue restrictions are also put in place and vary by industry. Many small businesses are limited to $7 million in annual revenues.

Small businesses are important to the economy for several reasons. They account for more than one-half of America’s economic output, help foster innovation, supply larger companies with products and services that larger companies do not or cannot supply themselves, supply products and services to consumers that large companies cannot or will not provide, and employ approximately 50 percent of the private workforce.

An entrepreneur is someone who assumes the risk of creating, organizing, and operating a business.

Entrepreneurs are innovative, risk-taking individuals who are motivated to succeed and who are flexible and self-directed. They work well with people, possess good leadership skills, and are “system thinkers.”

Not all entrepreneurs are the same: lifestyle entrepreneurs look for a business that matches their desired lifestyle, micropreneurs are satisfied with keeping the business small to achieve a balanced lifestyle, home-based entrepreneurs run their businesses out of their homes, and Internet entrepreneurs run their businesses strictly online. Growth entrepreneurs strive to create fast-growing businesses and look forward to expansion, and social entrepreneurs start businesses with a social mission in mind. Intrapreneurs are entrepreneurs who work in an entrepreneurial way within organizations owned by other people. Finally, serial entrepreneurs create and grow many different businesses over their business career.

A franchise is a method of doing business whereby the business sells a company’s products or services under the company’s name to independent third-party operators.

The advantages of franchising include that the business is a proven system of operation, franchises benefit from economies of scale, and the franchisor often offers training and marketing support as well as market research.

The disadvantages of franchising include a lack of control over the look of the store and the product or service being offered, start-up costs and monthly fees that must be paid to the franchisor, and a heavy workload. In addition, franchises will be affected by negative news involving the franchisor or another franchisee of the same company.

A business plan outlines the goals and strategies of a company, including its marketing plans, financial forecasts, a risk analysis, and an operational plan. Neglecting to consider any of these options can doom a business from the start.

The reasons new businesses fail include accumulating too much debt, inadequate management, poor planning, and unanticipated personal sacrifices.

The SBA offers assistance in the legalities associated with starting and operating a business as well as education and training, financial assistance, disaster assistance, and counseling.

SCORE volunteers provide free assistance by reviewing business plans, helping with tax planning, and offering new ideas and fresh insights. Other mentoring sources include industry-related conferences and other organizations, such as the EO.

Business owners can receive formal classroom training at two- and four-year colleges and participate in internships with companies in similar industries for hands-on training.

Business incubators support start-up businesses by offering resources such as administrative services, technical support, business networking, and sources of financing that a group of start-up companies share.

Advisory boards offer guidance to new business owners, but they generally do not have authority to make decisions.

Enterprise zones are geographic areas targeted for economic revitalizing by state and federal governments. Businesses receive generous tax benefits for locating and hiring in these enterprise zones.

The benefit of using cash borrowed from friends and family members is that, unlike banks or other lending institutions, these contacts often do not require high rates of return on their investments or demand to see the business turn a quick profit. However, the potential drawback is that these types of personal loans can sometimes be handled unprofessionally.

The benefit of credit cards is that they are a convenient means of acquiring short-term cash. However, the risk associated with using credit cards for initial business financing is the high rate of interest charged on unpaid balances.

When more money is needed than credit cards, friends, or family can provide, another source of financing are small business loans from banks and savings-and-loan institutions. Lines of credit or start-up loans are also available and can be used to bridge short-term capital needs. Federal and state grants may also be available, depending on the nature of the business.

Angel investors are wealthy individuals who are looking to invest in interesting businesses with good prospects for growth and returns. Generally, angel investors do not seek managerial roles in the businesses they invest in and often have a longer time frame to receive a return on their investment.

Venture capitalists invest in a business in return for some form of equity or ownership in the business. Venture capitalists usually want to play an active role in the management of the companies they invest in. Consequently, this funding option may not be attractive to business owners who aren’t open to the idea of relinquishing control of their businesses.