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MODULE 8

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2 views27 pages

MODULE 8

Uploaded by

meshack yesse
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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MODULE 8

MANAGING SMALL BUSINESS

12/15/2024 1
MANAGING SMALL BUSINESS
To be covered:
• Define small business
• Characteristics of small business
• Scope of small business in Tanzania
• Distinguish small business from large business
• Role of SMEs in national economic
development
• Problems faced by small business
12/15/2024 2
A: DEFINITION OF SMALL BUSINESS

• The small-business firm could be


defined as one that is independently
owned and operated, not dominant
in its field, and does not engage in
innovative practices. Also Small
Business defined as a firm that is
independently owned and operated
and is not dominant in its field.
12/15/2024 3
Cont…….

• Management is commonly defined


as the alignment and coordination of
multiple activities in an organization.
Business owners use management
skills to accomplish the goals and
objectives of their company.

12/15/2024 4
Cont…..
• Small business management
requires business owners to use a
mix of education, knowledge and
expertise to run their company.
• Examples of criteria used to
measure size are:
–Number of employees i.e. the
number of employees in the
12/15/2024 5
Cont…….
– Sales volume
– Capital i.e. financing of the business is
supplied by one individual or a small
group
– Asset size i.e. compared to the biggest
firms in the industry, the business is small
– Volume of deposits
– Ownership i.e. small firm generally owned
by individual or group of few individuals
(partnership)
12/15/2024 6
Cont…..
– Nature of management i.e.
management of small business tend to
be personalised and independent
– Technology i.e. small business is
generally labour intensive
Although the first criterion listed above –
number of employees – is the most widely
used yardstick, the best criterion in any
given case depends upon the user’s
purpose.
12/15/2024 7
B:CHARACTERISTICS OF SMALL BUSINESS

Small businesses have special


features of which distinguish them
from the large business. The
following are the features which
depicts the nature of small
business;
–Highly personalized character. The
owner himself is generally the
12/15/2024
manager. 8
Characteristics………….
–Independent management actively
managed by owners.
–Largely local in its area of
operations.
–Ownership held by one individual
or a small group.
–Relatively small size within the
industry.
12/15/2024 9
Characteristics…..…..
–Largely dependent on internal
resources. Small business use local
resources.
–Labour intensive. Capital
investment is limited due to use of
simple technology.
–Simple organization. A small
business unit has few or no layers
of management.
12/15/2024 10
C. SCOPE OF SMALL BUSINESS MANAGEMENT
Small business covers a wide range
of business activities. The range is
wide in framework of
manufacturing, trading and
services.
• The coverage of manufacturing
involves;
– Handloom and handcraft
–
12/15/2024 11
Scope………

• Trading includes;
–Wholesaling & Retailing
–Commission agents

12/15/2024 12
Scope………

• Services include;
– Professional service e.g. law,
accounting, medicine consultancy
etc
– Commercial services e.g. transport,
construction, warehousing, real
estate etc
– Personal services e.g. fashion shops,
dry cleaning, restaurants etc
12/15/2024 13
D. DISTINGUISH SMALL BUSINESS
FROM LARGE BUSINESS

12/15/2024 14
CHARACTERISTICS OF SMALL BUSINESS
• In Tanzania, small business is used to
mean micro, small and medium
enterprises engaging up to four people
or employing a capital of up to TZS five
million, between five and 49 employees
or with a capital from TZS 5 to TZS 200
million and between 50 and 99
employees or with a capital from TZS
200 to TZS 800 million.
• Summarized in next slide;
12/15/2024 15
CHARACTERISTICS OF SMALL BUSINESS cont..

Type/level Capital Number of


of small employees
business
Micro Less or equal 1 to 4 people
enterprise to 5M
Small 5M to 200M 5 to 49
enterprise people
Medium 200M to 50 to 99
enterprise
12/15/2024 800M people 16
CHARACTERISTICS OF LARGE BUSINESS

• Promoted and professionally managed


through employed persons.
• Large capital
• Capital contributed by large section of
shareholders.
• Large assets
• Huge turnover/sales/profit
• Easy to access to institutional finance
• Have greater leverage for development
12/15/2024 17
E: ROLE OF SMALL BUSINESS IN TANZANIA

The role played by small business are


summarized as follows;
• Generate immediate an large scale
employment opportunities with
relatively low investment
• Eradicate unemployment problem
from the country
12/15/2024 18
Role………
• Encourage dispersal of industries to
all over the country covering small
towns, village and economically
lagging regions.
• Bring backward areas too in the
mainstream of national development
• Promote balance regional
development in the whole country
12/15/2024 19
Role………
• Ensure more equitable distribution
of national income
• Encourage effective mobilization of
country untapped capital and human
resources.
• Improve the level of living of people
in the country.

12/15/2024 20
F: PROBLEMS FACED BY SMALL BUSINESS
• SMEs face many challenges in
today’s ultra-competitive business
world; fortunately, contemporary
times have also blessed
entrepreneurs with more resources
for tackling those problems than
ever before. The following are
challenges faced by SMEs today, its
possible solutions :
12/15/2024 21
Problems…..

1. Cash flow management


• Part of the problem stems from delayed
invoicing, which is common in the
entrepreneurial world. For instance they can
perform a job, send an invoice, then get paid
(hopefully) 30 days later and in the
meantime, they have to pay everything from
the business operations.
• The solution: Proper budgeting and planning are critical to
maintaining cash flow, but even these won’t always save
the business from stressing over bills. They can also require
a down payment for the delivered products and services. 22
12/15/2024
Problems…..…..

2. Time management
• Time management might be the biggest
problem faced by SMEs (entrepreneurs),
because of involvement in different
business issues.
• The solution: It is recommended to Create goal lists (list
of lifetime goals, broken down into annual goals, broken
down into monthly goals, then broken down into weekly
goals) and elimination or delegations of any tasks that
do not interlock with the business goals.
12/15/2024 23
Problems…..…..

3. Choice of what to sell


• Most of SMEs they make wrong
choice of what goods and services to
sell in different market niche.
• The solution: recommended to admit the weakness in
identifying prosperous niches(if any), and delegate the
task to someone who is strong in this area. Also
conducting market research and create a report with
suggested niches, backed by potential profit margins
and a complete SWOT analysis: Strengths, Weaknesses,
Opportunities, and Threats.
12/15/2024 24
Problems…..…..

4. Marketing strategy
• Most of SMEs don’t know the best
way to market their goods and
services in terms of promotion
targeted marketing that gets results.
• The solution: creation of marketing plans and
placing ads, and outsourcing expertise on
marketing strategy.

12/15/2024 25
Problems…..…..

5. Capital
• Capital to start or grow is another
problem, but they have little capital to
do it with.
• The solution: There are many ways to earn
funding like saving or funds from traditional bank
loans to family and friends to Kicks tarter
campaigns. entrepreneurs can choose out of
these routes though equity is the most
recommended.
12/15/2024 26
Problems…..…..

6. Slow Business growth


• The challenge: Most SMEs tend to
grow at very slight rate because of
different ground based on customers
knowledge.
• The solution: They must Create new processes
that focus on customers perceptions and
preferences .

12/15/2024 27

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