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Cbs - Ed - CHP 5.2 Introducing Small Business

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13 views10 pages

Cbs - Ed - CHP 5.2 Introducing Small Business

chapter2

Uploaded by

saymonkhan318
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Introducing Small Business

Defining small business


Businesses may be large, medium, or small. Basically, the size
of a business is determined by the amount of capital, number
of employees, volume of sales, and management style.

However, the size of small business varies from one industry to


another industry. Moreover, the definition of small business
even varies from country to country.

A small business is a business which is usually organized and


managed by the owner or his/ her family members.
Some Definitions of Small
Business
According to Small Business Association
“A small business is a business which is independently owned and
operated, & not dominant in its field”.

According to Stoner, Freeman, and Gilbert


“Small businesses refer to businesses locally owned and managed,
often with very few employees working at a single location”.

According to BSCIC (Bangladesh Small and Cottage Industry


Corporation), a small business is a business in which the value/
replacement cost of durable resources other than land and
factory buildings is between Taka 0.5 million and 15 million and
employment generation is not more than 50 people. Whereas
cottage industry means an industry in which members of a
family are engaged in part-time or full-time in manufacturing or
service-oriented activities.
Types of small
businesses
The following are the broad types or classifications of small businesses:

 Retailing (grocery, fast food, restaurant, lounges, appliance, hardware etc.)

 Services (repairing, plumbing, travel agencies, electrician, hair-dressing etc.)

 Manufacturing (sheet metal, mini steel mill, plastics, food processing etc.)

 Agriculture (crop production, food processing, dairy farm, vegetation etc.)

 R&D (software development, specialized machinery, materials, products etc)

 Consulting (Financial, investment, advisory, marketing, risk management etc)


Features of a small
business
 Managed and run by the owner independently with little or no delegation of
authority
 Funding is arranged by the owner through equity or borrowed capital from
banks, relatives, or friends
 All risks are borne by the owner
 Family workers or fewer hired workers
 Little emphasis on long-term planning
 Business is housed in small establishments
 Local market for products
 Volume of sales is relatively smaller
 Employees generally do not take part in decision-making
 No standard office/ factory hour
 Minimum legal formalities to register and operate the business
Advantages of small
business
1. Low capital to start with

2. Minimum legal formalities

3. Better understanding about market requirement due to small size

4. More personal contacts with suppliers

5. Monitor employees’ activities directly or very closely

6. Quick decision-making due to single-handed management


Disadvantages of small
businesses
1. Sole risk of the whole business

2. Insufficient financing

3. Poor or no economies of scale

4. Less skilled workers due to poor compensation packages

5. Market size is small

6. Difficult to use modern technology

7. Lack of proper record-keeping

8. Poor or ineffective marketing practices with almost no research


Stages of small business
development
The stages of small business development are as follows:

1. Pre-start up: a. Plan and develop contacts


b. Look for resources and opportunities
c. Form & nature of the firm to be decided

2. Start up: a. Location to be selected


b. Analysis of risks and rewards

3. Early growth: a. Feedback from market place to understand the


b. realities of the market and the operational
problems

4. Post-start up: a. Building an operational team


b. Find better market- dealership, franchise etc.
c. Look for external funds & outside family work
force
Causes of small business
failure
 Lack of expertise

 Poor product/ marketing strategy

 Over-optimism about market size

 Underestimating the start-up time

 Lack of start-up and working capital

 High start-up costs

 Wrong location

 Mistaking cash for profit

 Wrong selection of workers

 Poor administration

 Poor accounts management


Thank You

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