Types of Small Business
If you are considering starting a small business, it may pay to consider the many types of small business to identify the right one for your new business. Will your small business startup be a retail, service or manufacturing business?
All of these options will affect many of the decisions you will have to make about how your small business should be set up, how much small business startup funding you will require and how the business will operate.
Retail Business
A retail business involves the sale of goods or commodities in small quantities directly to the end consumers, where as a wholesaler or distributor sells consumer goods to retail businesses.
While I advise every prospective business owner to complete each of the steps in the 10 step process, if you are planning to open this type of business that decision will have an impact on how you go about completing the steps.
Unlike a service business, a retail business involves keeping inventory. You will have to find and then manage suppliers and a considerable amount of working capital will have to be invested in stocking your store. A retail business also usually relies heaily on foot traffic, so the location of your shop front will be critical.
The steps that will be critical to the success or failure of a retail business include:
- Researching the market,
- Finding your target customers,
- Making sure your target customers can easily locate your business premises,
- Finding and managing your suppliers, and
- Promoting your business.
Service Business
A Service Business is one in which income is produced chiefly by personal services rendered. The services can be personal in nature, such as providing a massage, life coaching, gardening or home maintenance. Or the services can be business services provided to other businesses.
The list of possible services is virtually unlimited, and the startup costs for a service business are usually lower than for a retail business. If you have a skill that can be used to provide a service and people are prepared to pay you for providing it, you have a business!
As this type of small business is centered on the provision of personal services, there is generally no need for the business to carry inventory and in a lot of cases, the service provider will not need premises as they go to the client instead of relying of foot traffic.
In a service business you are not selling physical goods, you are selling the service provider and what he or she can do for the client.
Manufacturing Business
A Manufacturing Business is a business engaged in manufacturing (i.e. producing) a product, which involves applying a manufacturing process to raw materials in order to convert them into an end product.
Depending on the product and the size of the business, a manufacturing business will either sell to a middle-man (a wholsaler or a retailer) or direct to the end consumer. If you manufacture your product to order and offer a customised product, you will probably sell to the end consumer. If you are a mass producer of a very standardised product you are more likely to sell to wholesalers or retailers.
This type of business is more likely to need business premises than a service business, and the premises will be significantly different to those of a retailer. A manufacturing business is more likely to be located in an industrial area rather than in the center of town, and if the business has a shop front it is likely to be attached to the manufacturing plant, and only be a minor part of the business operations.
Other Types of Small Business
While you are checking out the different types of small business, you might also like to investigate other startup options, like buying an existing business, investing in a franchise or joining an MLM company.
