Учебное пособие для студентов вузов Допущено Министерством образования Республики Беларусь в качестве учебного пособия для студентов экономических специальностей высших учебных заведений

В.Ф. Толстоухова

UNIT 1. The small business scene

Today small businesses are the heart of the market economy. There are a great number and variety of small businesses. People become owners and operators of small business firms in one of three ways: start a new firm, buy a franchise, buy or inherit an existing firm.

Small firms have been established to do just about any kind of business imaginable. They have been established to manufacture and distribute goods, to sell them at retail, and, of course, to provide all kinds of needed services. Some serve only the local community, while others function in national and international markets.

The vast majority of small firms concentrate on selling material products, although an increasing number of firms provide a service. Although an increasing number operate in local markets, services, too, are exported. In recent years there has been a great increase in the export of services, such as management consulting, medical, and tech­nological services.

The existence of a strong, healthy small business community has always been recognized as the best way to preserve competition, prevent monopolistic control of any industries, and thus assure the population of the benefits of competition through better prices and quality products. Incentives¹ have been provided to assist small firms. The government of the US created the Small Business Administration (SBA) in 1954 to provide financial, management, and procurement assistance² for small firms.

There are some facts that illustrate the importance of small business. According to the Small Business Administration:

99% of all businesses in the US can be classified as small;

43% of the gross national product³ is contributed by small business;

while large business has been cutting back employment, small business has been creating new jobs;

many of new products and services in the US are created by small businesses.

Numerous definitions of the term "small business" exist. A small business is one which is independently owned and operated and not dominant in its field of operation. A small business is one which possesses at least two of the following four characteristics: 1) mana­gement of the firm is independent. Usually the managers are also the owners; 2) capital is supplied⁴ and the ownership⁵ is held by an indi­vidual or a small group; 3) the area of operation is mainly local, with the workers and owners living in one home community. However, the markets need not be local; 4) the relative size of the firm within its industry must be small when compared with the biggest units in its field. Of the characteristics cited, most scholars believe that the fourth, relative size, is the most important.

The SBA traditionally uses the following criteria for defining small business: retailing⁶ (sales volume), service (sales volume), who­lesaling⁷ (sales volume), manufacturing⁸ (number of employees).

The following is a list of terms that can be used to describe a business. Each term tells something about the size of a business.

Total assets⁹ – all that a business owns.

Net worth¹⁰ – business assets less what is owed.

Gross profits¹¹ – money left from sales after all expenses (except taxes) have been paid.

Net profits¹² – what is left from gross profit after business income taxes are paid.

Employees – total number of workers and managers listed on the payroll¹³.

Income – net receipts¹⁴, the total sales¹⁵ less returns¹⁶, allow­ances¹⁷, and discounts.

It is necessary to keep records¹⁸ of a business for tax purposes and as a measure of growth. Some businesses fail because they are improperly expanded. Other businesses are unsuccessful because they expand too quickly and cannot handle problems that come with rapid growth. Many businesses remain small and provide excellent income throughout their lifetime.

Business operations are subject to review by local, state, and federal authorities. These reviews insure that rules and regulations are being obeyed and standards maintained. Some of the operations subject to review are listed here.

Income. Business income must be reported for income tax purposes. Other reasons for reporting business income include providing information for bank loans¹⁹, attracting investors, making equitable distribution of profits in partnership²⁰, and as a measure of business growth. The records are usually subject to an audit.

Working conditions. Clean and safe working conditions must be provided for employees and if required, medical and safety equipment must be provided.

Wages and hours. Work regulations and announcements must be posted where employees can read them. Employers must pay at least the minimum wage that applies to their employees.

Advertising, labelling, and packaging. Businesses must not be guilty of false advertising, mislabeling, or providing less than the labeled weight in a package.

Unfair practices. Laws prevent business persons from engaging in various unfair practices, such as price fixing and other means of restraining trade.

Discrimination. Federal and state regulations prevent an employee from being discriminated against because of color, race, sex, religion, or national origin.

Liability and compensation. Employers are required to carry insurance and provide adequate compensation for workers injured on the job and customers injured on the business premises.

1) How do people become owners and operators of small business firms?

2) What are the aims of establishing small firms?

3) What has always been recognized as the best way to preserve competition, prevent monopolistic control of any industries?

4) What facts illustrate the importance of small business?

5) Can you define a small business?

6) What is the most important characteristic of a small business?

7) What criteria are used for defining small business?

8) What terms describe the size of a business?

9) What operations of a small business are subject to review?

1) A fact that demonstrates the role of small business in the United States is that...

a. 95% of labour force is employed by small businesses.

b. 20% of businesses are small.

c. 43% of all businesses are small according to the definition of the Small Business Administration.

d. 51% of all businesses are small according to the definition of the Small Business Administration.

2) Which statement is not true in relation to business success?

a. As the population expands, there is a greater need for small businesses.

b. People with more education and experience usually have a better chance of success.

c. There is little or no risk in operating a small business if you have adequate capital.

d. The chances of business failure are reduced if you get sufficient and adequate training.

3) All of the following measure business size except

a. profits c. location

b. assets d. number of employees

4) Which of the following would most likely be self-employed?

a. teacher c. grocery clerk

b. barber d. minister

5) Which of the following is the definition of net profit?

a. income after expenses are paid

b. income after all taxes have been paid

c. gross income after taxes

d. assets minus liabilities

6) Which of the following is not a level of trade proficiency?

a. apprentice c. foreman

b. master d. senior

7) It is necessary to keep accurate business records

a. for tax purposes

b. to determine business size

c. to determine earnings

d. for all of these reasons

8) The fastest growing type of business is

a. manufacturing c. franchising

b. farming d. fishing

9) Which of the following is true?

a. There are more small businesses than large businesses.

b. There are more people employed in large businesses.

c. There are more large businesses than small businesses.

d. None of these statements is true.

10) Regulations are necessary because they

a. help politically powerful big business

b. make business practices more equitable and fair

c. give government officials power

d. create jobs

11) Which of the following would probably not be self-employed?

a. attorney c. artist

b. airline pilot d. plumber

12) Which one of the following is a distributive kind of business?

a. radio station c. canning factory

b. advertising agency d. warehouse

WORD STUDY

3. Match the words with their definitions.

loan, partnership, assets, retailing, payroll, sales, gross profit, net worth, net profit, profit

1) The entire resources of a person or business, tangible and intan­gible, such as accounts and notes receivable, cash, inventory, equipment, real estate, good will, etc.

2) The act of operating a retail business.

3) The capital investment an individual or partners have in a busi­ness after the liabilities have been subtracted from the assets, that is, the capital value of the business.

4) A surplus that remains after the cost of goods is subtracted from the total receipts.

5) A surplus after all the expenses have been paid, including opera­ting expenses such as heat, light, rent, and wages, but excluding taxes.

6) A list of employees who are paid periodically by a firm, along with other information; also includes the money to pay employees.

7) A bookkeeping term referring to the amount of income derived from the sale of merchandise or services, both for cash and on account, less taxes, returns, and allowances.

8) An amount of money that is borrowed and must be paid back by a certain date or on demand; usually interest is charged on the money borrowed.

9) A business owned by two or more people.

1) The chemical in the ... was too harsh for her, and she lost most of her hair.

2) Most large towns are ... with electricity.

3) She persuaded the Cabinet to agree to 1.2 million pounds ... for the industry.

4) Money is being used as an ... .

5) ... includes the sale, and all activities directly related to the sale, of products or services to those who are buying for business use.

6) With the introduction of the computer, large manufacturers applied the electronic advances to the ... process.

7) The law of warranties also applies to ... .

8) Remember that the time business owners spend on ... ... takes the owners away from other aspects of their business.

9) Transfer of ... is probably not the most important aspect of priva­tization.

10) ... ... ... is the basic measure of the total output of goods and services in the economy.

5. Complete each sentence with the correct form of the word in capital letters. In some cases you will have to make a negative by using the prefix il- or un-.

1. employ

1) In an area of high ... people are desperate to find jobs.

2) Every ... of the firm is entitled to a 10% discount.

3) Her ... gets very angry if she uses the phone too much.

4) I'm looking for temporary ... during the summer holidays.

2. engage

1) The line is ... so I'll have to try again later.

2) Cancel all my ... for the rest of the day, please.

3. finance

1) Her ... adviser is convinced the project will be a success.

2) If the company is ... sound we might consider taking it over.

4. grow

1) There is a ... awareness of the need to impove productivity.

2) The government is worried about the ... in public expenditure.

5. legal

1) It's ... to sell such goods without a proper permit.

2) They questioned the ... of the company's action.

6. possess

1) I had in my ... a portion of money.

2) I am a proud ... of two kiosks in Plekhanov Street.

3) A small business is one which ... at least two characteristics.

7. own

1) The ... is held by an individual or a small group.

2) Julie's father ... a business that dealt in bulk orders.

3) The ... of the bookstore was sitting at his desk.

8. distribute

1) British Leyland ... their cars throughout the world.

2) His job is to organize the ... of money to students.

9. know

1) We need somebody with a good working ... of French.

2) Our company is virtually ... abroad.

3) She's obviously very ... as far as marketing is concerned.

10. establish

1) There he had set out to ... his own business.

2) The ... of legal minimum pay is one of the objectives.

11. existence

1) These institutions do not come into .. except as a result of state policy.

2) We have to find ways of making the ... system work better.

3) Numerous definitions of the term "small business"....

give	rely	back	in
lay	bring	on	to
leave	stick	forward	off
pay		out

2) Unfortunately we ... a supplier who was not able to supply us with the components he had promised.

3) They ... to consumer pressure and redesigned the packet.

4) In his speech he ... the most important detail. How much is it all going to cost?

5) Last year Firmin's ... half their workforce because of a lack of orders.

6) He ... his original demand. We couldn't get him to change his mind.

7) They ... the money they had borrowed only after we had threa­tened to take them to court.

7. Combine a noun from the list on the left with a preposition from the list on the right to complete each sentence. You must use each noun once only, but each preposition can be used more than once.

congratulations	intention	in
emphasis	point	of
experience	result	on
increase

2) Have you had any ... this type of work?

3) There seemed to be little ... continuing the discussion.

4) They have been offered a considerable ... salary in return for more flexibility.

5) I have no ... resigning. It's up to them to dismiss me if they aren't satisfied.

6) By the way, ... winning the Waverley contract.

7) As a ... the adverse publicity, their sales went down.

8. verb + preposition

Look at the following sentences taken from the reading passage

"While large business has been cutting back employment..."

"Business must not be guilty of false advertising..."

Now complete the following sentences with the correct preposition.

1) They put a lot of money ... the project.

2) The project had to be put ... due to production delays.

3) Once we had got ... the joint venture, it was very difficult to get ... of it.

4) Companies are often unwilling to give ... their independence.

5) I'd like to take ... your offer of collaboration.

6) The company was put ... by the size of the investment. They decided instead to go ... partnership with a local firm.

7) They made ... for their lack of financial investment by doing a lot of the ground work.

8) We could only pull ... of the joint venture if they gave ... their position in the market.

DISCUSSION

1. How does the Committee for Economic Development measure a small business?

2. Does the U.S. government support small business firms? How?

3. Can you name an example of a manufacturing firm? A wholesaling firm? A retailing firm? A firm in the field of finance?

4. Prepare a list of 5 different business firms. Explain how you would classify each of these firms as small, medium, or large according to the size measurement of the Small Business Administration.

WRITING

1. Write a summary of the text.

2. Write a short essay on why you agree or disagree with the state­ment that a strong small business community is in the best interest of all citizens.