“The chief business of the American People is business.”
- Calvin Coolidge, 30th President of the United States of America
Is it surprising that 98% of all businesses registered worldwide are categorized as a small business? The definition of what constitutes a small business may vary from one country to another but the characteristics are the same. In comparison to larger-scale enterprises, small businesses generate smaller revenues, have fewer employees, and operate on a limited scale.
Consequently, the risks facing small business are greater. Studies have shown that if a small business cannot succeed within its first 5 years, the chances of failure increase by more than 50%.
Despite the risks, many entrepreneurs remain undaunted. They dare to dream and work to turn the vision into reality. The entrepreneurial spirit has been responsible for the growth and prosperity of America since the 17th century when the first settlers made their way to the country.
A Brief History Of Small Business In America
The first settlers were farmers who overcame difficulty and hardship by working on acres of land; growing produce and raising livestock to support their families. In addition to food, the farmers also used the land to manufacture other basic necessities such as soap, toiletries, shoes, and clothes.
As the population grew, so did the needs of the people. Farmers were growing produce that could be supported by the land they lived in. It wasn’t for long that settlers across regions saw the benefit of trading commodities. Trade made it possible for consumers to avail of new products and acquire services.
Commodities were subject to the Law of Supply and Demand. There were times when farmers would not have produce to trade because it was not growing season.
Small businesses came up with a compromise solution by establishing a credit system. Instead of paying for products with cash or produce, businesses accepted credit coins or charge plates which committed payment to be made at a future date.
By the 20th century, economic activity had grown to a point that small businesses had difficulty producing goods and services sufficient to meet demand. The small business naturally adapted to the changing landscape by expanding the scope of operations.
Small businesses began hiring more people to increase production output. Likewise, the banking system had evolved to a point that business owners could avail of credit to cover the cost of expansion.
Departments were created to help organize the additional functions of the business. To manage these new departments, people with the right experience, competencies, and proper education were hired to oversee the performance of all duties and responsibilities.
Hierarchies and workflows were introduced to lend organization and stability to the frenetic pace businesses were moving at. It has been said that the very first incarnation of the American corporation can be traced to the earlier years of the 20th century.
What Can Overseas Small Business Learn From American Small Business?
America has long been referred to as the “Land of Opportunity”. The United States is home to many immigrants who have come from far-off places to carve a new life as nationalized citizens.
We’ve heard or read many inspiring stories about immigrants who were able to support their families and have a great life with the small business they put up.
Some immigrants became very successful entrepreneurs in America. Here are a few of them:
- Thomas Peterffy – Hungarian immigrant who arrived in New York in 1965. Thomas worked as a draftsman and as a computer programmer for a stock trading company. He founded a company that facilitated electronic stock trading with the $200,000 he had saved up. The venture led to his founding of the Interactive Brokers Group. Thomas has an estimated net worth of $12 Billion.
- Jerry Yang – Jerry came to the United States in 1976 by way of Taiwan. Jerry only knew 1 English word “shoe” but excelled throughout school and eventually graduated from Stanford University. In 1995, Jerry founded Yahoo! When he stepped down from Yahoo! Jerry was worth $1.15 Billion.
- Andy Grove – Born Andras Istvan Grof in Hungary, Andy escaped Nazi-occupied Germany and came to America in 1967. Andy funded his studies at the City College of New York by working as a busboy. In 1968, Andy moved to California and co-founded Intel.
Other than immigrants, there are also the Overseas Workers – foreigners who travel to America to find well-paying jobs so they can take care of their families back home.
The Philippines has the highest number of overseas workers in the world – 2.33 million. 57.1% of Overseas Filipino Workers (OFWs) work in Western Asia. Only 5.4% work in North America.
OFWs are considered “national heroes” in the Philippines because their remittances contribute $13.7 Billion to the economy.
The stories of life in America make it back home. The entrepreneurs who made it big and the OWs who were able to support their families with monthly remittances often share their experiences in the great Land of Opportunity.
1. Be Resourceful – Work With What You Have
Small businesses are challenged by the lack of resources available at their disposal. Entrepreneurs are constrained by tight funds, limited materials, and the dearth of talent.
In most countries, local banks offer business loan programs for start-ups. However, interest rates may be high. You could be looking for a good quality substitute for a key ingredient but the domestic suppliers offer limited choices.
If you are really desirous with starting a business, be resourceful and work with what you have.
In the 17th century, the early settlers in America grew produce that could be supported by the land they lived in. The pioneers were able to manage because they were resourceful and open to working with other settlers.
What is your product or service about? What are the materials or main components of the product? Look for suppliers and ask them to provide sample materials that you can use to create prototypes. Identify the material that delivers the best results.
Determine your budget for the product and negotiate the best terms and price with the supplier.
Negotiation should always be viewed from a win-win perspective. Suppliers are willing to give you the price and terms you want. However, you must do your part by ordering the agreed-upon volume and paying on time.
2. Learn to Adapt to the Situation or Changing Conditions
Business conditions are changing rapidly. Digital technology has been a game-changer. Consumers have immediate access to information. Companies can use digital innovations to introduce more efficient processes in operations, finance, marketing, and other key areas of business.
If you don’t adapt to the changing conditions of business, you will become extinct. There are small businesses in Asia that still use traditional methods of marketing such as flyers, posters, and streamers to promote their enterprise. Many businesses – 63% – still don’t have a website.
A good example is the Philippines. Similar to Thailand and Indonesia, the Philippines has a notorious reputation for having horrendous traffic. Avoiding the inconvenience of traffic is one reason why online shopping is becoming more popular in the country.
Putting up an e-commerce website to complement your brick-and-mortar location can open up a new stream of revenue and give your customers a more convenient way of buying your products.
Small businesses in the U.S. adapted to changes in the business landscape by keeping track of products and services that were in demand. If they could not produce the item, the small business owner would initiate a trade or propose distributorship arrangements.
3. Embrace Competition
Free enterprise is an integral component of American small business. A by-product of the free enterprise system is competition. Because of competition, businesses had to focus on producing quality products and providing top-level services.
Competition also had businesses thinking of their profit margins. Between 2 products with similar features, price became the differentiator for the consumer. A good sign that an industry is booming is increased competition.
If more players are entering your industry, it means the enterprise is profitable. Don’t shy away from the competition! Embrace it because competition is part of running a small business.
Competition reminds you to “keep your guard up”; not to be complacent and to consistently look for ways to make your products better and your customers happier.
4. Develop a Long-Term Plan For Your Business
How do you see your business in 3 to 5 years’ time? Or have you thought that far? Developing a long-term plan for your business may seem gratuitous, especially for a startup small business. But planning for 3 to 5 years gives you the vision to pinpoint where you want your business to be in 1 year’s time.
Business planning is a step-by-step process. Before you can get to year 5, you must get through years 1 to 4. How will you get to year 2 if you can’t survive year 1?
The small businesses that thrived during 19th-Century America had the foresight to prepare for the challenges in the 20th-Century. They focused on expanding the production capacity and the volume of output by hiring more people and investing in machinery.
A good example would be Ray Kroc, the brilliant American entrepreneur who transformed a nondescript hamburger restaurant into the institution that McDonald’s has become.
Kroc bought out the McDonald brothers and invested in automating the food preparation system to reduce serving time, increase customer turnover, and generate higher revenues.
The late Ray Kroc had the vision to turn McDonald’s into the biggest fast-food chain in America. He invested in innovation that was unheard of in the food retail industry at the time. By doing so, McDonald’s became a leader in fast-food service not just in the United States, but in the world.
5. Expand Your Value Proposition
In the 1970s and 1980s, more foreign businesses made their way to America’s shores. Many of these foreign businesses were in manufacturing. Carmakers from Germany and Japan started to eat up the market share of U.S automobile companies such as Ford and General Motors.
In contrast, the small business industry had proven resilient to the challenges posed by foreign corporations. The success of small business America inspired more Americans to become entrepreneurs.
Because of their smaller scale, it was easier for small businesses to change the business model; offer new products and services and expand the overall value proposition.
If you have an idea, work on it. The idea may seem like a concept now but in a few months or years, it could set the standards in the industry.
Innovation was the reason why Silicon Valley grew to become the start-up hub of America. Banks and other financial institutions introduced lending programs to assist budding entrepreneurs. Successful businessmen offered to fund startups and started a wave of venture capitalism.
Conclusion
Today, the small business continues to be at the forefront of America’s economic growth. In 2018, small businesses added 1.9 million jobs to the economy. Since 1998, small businesses have grown by an average of 1.9% per annum and have accounted for 44% of America’s GDP.
Entrepreneurs have long been hailed as America’s heroes. What starts out as a business idea intended to support a family or a lifestyle can eventually drive an economy from hardship to prosperity.
The educational institution has acknowledged the role of small businesses in the growth of America that schools have begun offering courses and degrees in Entrepreneurship.
Likewise, schools in Asia and Europe have followed suit and have included specialized courses in entrepreneurship and business development.
The foremost proponents of these courses are the Asian Institute of Management (AIM) in the Philippines, United International Business Schools (UIBS) in Switzerland, the University of Wollongong (Dubai), Woxsen School of Business (India), and Help University (Malaysia).
A small business may be considered “small” because of its size and scale. However, as a collective, small businesses are big in value – they can move and shake an economy.
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