Franchise Update Magazine Issue IV, 2014 | Page 63

BY DARRELL JOHNSON What Is a Small Business? Protecting the franchise business model S mall business was supposed to be the engine that drove us out of the economic doldrums of the past 6 years. After all, doesn’t small business generate most of the jobs? Based on the rhetoric on Capitol Hill, in the media, in banking circles, and just about everywhere, small business is approaching mom-and-applepie status. Yet it clearly isn’t universally treated with the love that many are pretending to share. To understand the ways we are allowing the undermining of small businesses, let’s separate fact from fiction so we can begin to understand some of the implications to franchising. Let’s begin with a definition of small business. That’s the root of the problem. There isn’t one, at least not a universal one. The Census Bureau doesn’t define “small” at all. The federal government leaves that challenge to the Small Business Administration. The SBA has standards that define the largest a small business (including all its affiliates) may be and still qualify for federal programs. It uses two general caps: 500 employees for businesses in most manufacturing and mining industries, and $7.5 million in average annual receipts for businesses in many non-manufacturing industries. However, there are a number of exceptions. For instance, an office of dentists has a $7.5 million maximum and an office of physicians has an $11 million maximum. We have legislators who want to do things for (or is it to?) small businesses, so they take up the challenge of how to help them. Capitol Hill has pushed the banking community to make smallbusiness loans, and banks report on that activity. Not surprisingly, the big banks and national regulatory agencies use definitions that seem to show how well banks serve that business segment. However, rather than tackling the challenge of a definition of a small business, generally they track how many small loans they make to businesses. Figuring that most