Not All Small Businesses Are Alike

The first week of May is small business week, according to Entrepreneur magazine.

A Pew Research study found that the public had a more positive view of small businesses than any other institution in the country –- they beat out both churches and universities. Many claim that small businesses are the engine of the American economy.

However, the Harvard Business Review notes that “if policymakers really want to help small businesses — and they should — they need to understand that not all of them are alike. Each type has a way it contributes to employment and the vibrancy of the American economy.”

There are 28 million small businesses in America and they fall into four different segments:

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“Treating all small businesses the same can lead to potentially misleading declarations, and bad policy. For example, a ‘mom and pop’ Main Street shop has different financing needs than a high‐tech startup. One might need a bank loan while the other might need a patient equity investor like an angel or venture capitalist. Setting up an innovation ecosystem around a university or an emerging technology helps potential high-growth entrepreneurs, while downtown revitalization can help local businesses from the Main Street category.”

“Each type of small business matters for different reasons. The key is to remember that what helps one group will not necessarily have the equal or any impact for another.”