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Tuheen Tarafder

Poonam Barve

Concept & Definition

A small scale business is a business which is privately owned and operated, with a small number of employees and relatively low volume of sale. They are privately owned corporations, partnerships, sole proprietorships. They are classified in to other methods such as sale, assets, or net profits. Small business are common in many countries, depending on the ecosystem in operation. For Instance: convenience stores, and other small stores like kiranas, bakery, tradesmen, lawyers and accountants etc.

What is Small Business?

An independently owned and operated business, organized for profit and that is not dominant in its field. Qualifying as a small business depends on the industry in which the business operates and the organization that selects the standards. Depending on the industry, size standard eligibility is based on the average number of employees for the preceding twelve months or on sales volume averaged over a three-year period. The legal definition of "small" varies by country and by industry, ranging from fewer than 15 employees under the Australian Fair Work Act 2009, 50 employees in the European Union, and fewer than 500 employees to qualify for many U.S.

Examples of small business includes following: Manufacturing: Maximum number of employees may range from 500 to 1500, depending on the type of product manufactured. Wholesaling: Maximum number of employees may range from 100 to 500 depending on the particular product being provided. Services: Annual receipts may not exceed $2.5 to $21.5 million, depending on the particular service being provided. Retailing: Annual receipts may not exceed $5.0 to $21.0 million, depending on the particular product being provided. Special Trade Construction: Annual receipts may not exceed $7 million; and Agriculture: Annual receipts may not exceed $0.5 to $9.0 million, depending on the agricultural product.

Characteristics of Small Business

Some of the characteristics of small Business includes following: Entrepreneurial spirit Limited Managerial skills Low cost per job created Size definitions Demographics Franchise Business

Entrepreneurial Spirit
The Owners of small business enterprise should have motivation, optimism, energy and desired to get succeed. They are not scared of risk and they take calculated, yet high risks.

Limited Managerial Skills

Management broadly includes planning, leading, organizing and controlling across all the major activities of a business. Small business owners generally have one (or a few) strong skill sets. Skills in important areas of finance, sales and marketing, technical, production, human relations etc are generally lacking.

Low cost per job created

Small businesses collectively employ a lot of people and comparing the amount of money invested in small businesses. The cost per jobs created is way lower than big business.
Small businesses work using people, whilst big businesses work using systems.

Size Definitions
The legal definition of "small" varies by country and by industry. In the United States the Small Business Administration establishes small business size standards on an industry-byindustry basis. generally specifies a small business as having fewer than 500 employees for manufacturing businesses and less than $7 million in annual receipts for most nonmanufacturing businesses. In the European Union, a small business generally has under 50 employees.

However, in Australia, a small business is defined by the Fair Work Act 2009 as one with fewer than 15 employees. By comparison, a medium sized business or mid-sized business has under 500 employees in the US, 250 in the European Union and fewer than 200 in Australia.

According to a survey run in the United States among businesses having <500 employees in late 2010, about 50% of minute/micro-businesses are owned by women.

Franchise Business
Franchising is a way for small business owners to benefit from the economies of scale of the big corporation (franchiser). For example: Mc Donalds, True value Hardware stores. The small business owner can leverage a strong brand name and purchasing power of the larger company while keeping their own investment affordable.

Types of Small Business

A small business is generally a privately owned and operated organization, which works with a small number of employees and deals in relatively low volume of sales as compared to bigger companies. The Types of small business includes the following: Sole proprietorship Partnership Close corporation Limited Liability Partnership (LLP)

Sole Proprietorship
Sole proprietorship is a type of business model in which there is just one owner who has all the rights to take decisions. All debts of the business are his personal debts and whenever required The sole proprietor enjoys unlimited freedom within the precincts of his workplace There is no rules and regulation.

Partnership is a business entity in which some people come together to start a business and share the profits or losses of it collectively. Partnerships are generally preferred over corporations because of the levied taxes. Unlike sole proprietorship, the right of making decisions is distributed amongst the partners, in this type of small business

Close Corporation
A Close Corporation is a form of business ownership which combines the aspects of sole proprietorship and partnership. This model of business is particularly helpful and suitable for small to medium-sized enterprises. A close corporation is almost like a company but less expensive and easier to run. Unlike a company, a close corporation does not have directors, shareholders or a chairperson of the board.

Limited Liability Partnership

A limited liability partnership is almost similar to a general partnership. n this type of business entity, none of the partners are liable for the actions of others. The formation of a small business and the blueprint of its installation is solely decided by factors, like, the number of members and the initial investment.

Objectives of Small Business

When a sole trader sets up they may have some unstated aims or objectives - for example to survive for the first year. Other businesses may wish to state exactly what they are aiming to do. A mission statement sets out the business vision and values that enables employees, managers, customers and even suppliers to understand the underlying basis for the actions of the business.

Business objectives are the stated, measurable targets of how to achieve business aims. Objectives give the business a clearly defined target. Plans can then be made to achieve these targets. This can motivate the employees. It also enables the business to measure the progress towards to its stated aims.

The most effective business objectives meet the following criteria: S Specific objectives are aimed at what the business does, e.g. a hotel might have an objective of filling 60% of its beds a night during October, an objective specific to that business. M - Measurable the business can put a value to the objective, e.g. 10,000 in sales in the next half year of trading. A - Agreed by all those concerned in trying to achieve the objective. R - Realistic the objective should be challenging, but it should also be able to be achieved by the resources available. T- Time specific they have a time limit of when the objective should be achieved, e.g. by the end of the year.

The main objectives that a business might have are:

: Survival a short term objective, probably for small business just starting out, or when a new firm enters the market or at a time of crisis. Profit maximization try to make the most profit possible most like to be the aim of the owners and shareholders. Profit satisfying try to make enough profit to keep the owners comfortable probably the aim of smaller businesses whose owners do not want to work longer hours. Sales growth where the business tries to make as many sales as possible. This may be because the managers believe that the survival of the business depends on being large. Large businesses can also benefit from economies of scale.

Problems faced by Small Business

CASH The majority of companies dont manage it well. Loans from family and friends and new equity are the least common sources. Commercial loans, grants and overdraft had become substantially harder to obtain for a significant minority of businesses.

Lack of a clear plan Most businesses dont knowhow to plan . Lack of a plan worsens the cash problem by wasting cash chasing tempting diversions, and throwing money at problems. Equally important is revising your plan according to changing economic and business conditions and to ensure your survival in recession .

Ineffective leadership This issue takes many forms. It is frequently in the form of depth of leadership . The founder of the company is too much hands-on and a) does not concentrate enough on his primary role as a leader rather than a manager; and b) fails to enlist support of competent managers and staff behind him or her either through recruitment.

Sales/marketing effectiveness This leads back to planning and leadership. Many businesses have not taken the time to decide what their USP is. They try to compete in conflicting areas, such as lowest price and highest service. One takes away money and the other adds cost. Part of the planning process for a new product should include a very clear answer to one simple question, with all of the products and service available to my customers why should they buy from me?

Other problems...
Strategies that are developed are never executed Improvement projects fail Leader spends less than 1 hour per month on strategies. Employees dont know their companys strategy. Organizations dont have performance measurements in place.

Growth of Small Scale sector of India

A major objective of planned economic development has been industrialization and employment generation. The industrial policy resolutions had, from time to time, encouraged the growth of small scale industries in order to generate employment, promote balanced regional growth, have equitable distribution of wealth and promote exports.

SSI Sector in India creates largest employment opportunities for the Indian populace, next only to Agriculture. It has been estimated that 100,000 rupees of investment in fixed assets in the small-scale sector generates employment for four persons.

Typical examples include: convenience stores, other small shops such as a bakery, or delicatessen), hairdressers, tradesman, lawyers, accountants, restaurants, guest houses, photographers, small-scale manufacturing and online business, such as web design and programming, etc.