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What exactly is a small business?

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Posted: Sunday, October 10, 2010 12:00 pm | Updated: 9:10 am, Thu Aug 16, 2012.

By Andrew D. Brosig

Killeen Daily Herald

Business owners face a variety of challenges as they work to get their dream off the ground, regardless of the economic situation, said John Crutchfield, president of the Greater Killeen Chamber of Commerce.

At the bottom line, those challenges can be broken down into two main concerns.

"It's always planning, and it's always funding, almost without exception, in this or any other market," Crutchfield said. "They don't develop a business plan. They don't take the time on the front end and that always leads to the second issue."

Another part of the problem comes in terms of definitions.

Exactly what constitutes a small business? Depending on who you ask, you'll get a different answer to the question.

According to U.S. Census Bureau statistics released recently, small businesses - defined in the report as "self-employed in own not incorporated business" - make up just 1,425 of the more than 42,600 civilian employees age 16 and older in the Killeen Metropolitan Service Area. That equates to just 3.3 percent of the work force in the local MSA.

Crutchfield and others think that number is low, for many reasons. Most small businesses have undertaken some kind of incorporation process for the legal benefits and protections the status offers, Crutchfield said.

"How do we segment these guys and find out who's incorporated?" he said. "My reaction is that (Census Bureau number) is far too low."

Marcus Carr, a counselor with the Killeen Business Resource Center, agreed. The marketplace in the Killeen area is fertile ground for small businesses, he said.

"There's a lot of opportunities here in Killeen for small businesses," Carr said. "A lot of people here have a skill, know a trade or have an expertise.

"There's a lot of service-oriented businesses in the community and there does seem to be a lot of retail here," he said. "Something I've found as a business counselor is people here love to spend money."

But that still leaves the question: What is a small business? Carr thinks any business with 100 or fewer employees qualifies. Crutchfield and the Chamber of Commerce, for purposes of annual business awards, uses 50 or fewer workers for the designation.

Herb Austin, district director for the U.S. Small Business Administration office in Fort Worth, sets the bar even higher.

For a manufacturing business, the SBA ranks any business with 500 employees or less as a small business. In a wholesale distribution business, 100 employees is the magic number.

The distinctions get more difficult in the retail and service industries, Austin said. Any business with a net worth of $50 million or less and annual revenue topping out at $5 million is a small business by SBA standards, he said.

"Based on those guidelines, 97 percent of businesses in any area would be considered a small business," Austin said.

And those numbers are increasing, he said. During the fiscal year that ended Sept. 30, 2009, the district SBC office assisted 1,281 small businesses with about $500 million in funding assistance, including business loans. During the fiscal year just closed, that number topped $650 million in financing to more than 1,700 small businesses.

SBC lending can help a new business get off the ground or an existing business to expand.

"The small business climate (in 2010) is stronger than it was in 2008, stronger than it was in 2009, as reflected by the number of small businesses assisted," Austin said. "The types of businesses are a mixed bag of people, restaurants opening up, people starting businesses at home. And Texas is doing by far better than many other states."

Contact Andrew D. Brosig at abrosig@kdhnews.com or (254) 501-7469

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