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