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The nature of small business


ë efining small business

ë haracteristic features of a small
ë The economic significance of the
small-business sector
ë ntrepreneur or small-business

ë efine what constitutes a small business

ë entify the key characteristics that make
small businesses ifferent from other
types of business organisations

ë ist the aantages an isaantages of

starting an operating a small business
ë utline the importance of small business
in the economy
ë plain the ifference between small
business management an



  ! a small-scale,

inepenent firm, which is usually
manage, fune an operate by its
owners, an whose staff size, financial
resources an assets are comparatiely
limite in scale.
ë ost efinitions are a miture of both
qualitatie an quantitatie measures.

  criteria for small business:
ë nepenently owne an operate
(not part of a larger corporation)
ë The owners contribute most, or all, of the
operating capital (i.e. they bear the risk
an they are entitle to the profits)

  criteria for small business:
ë The owners make most ecisions an are
not answerable to anyone else
ë The business has a small market share

"   ariables that are use to

categorise an sort businesses inclue:
ë the number of staff
ë wages an salaries epeniture
ë legal structure
ë total annual turnoer (sales reenue)
ë alue of firm assets
ë share of ownership that is hel by the


ë The most commonly-cite efinition is

that proie by the Australian Bureau of
Statistics (ABS)
ë Accoring to the ABS, there are four
principal categories of businesses:


ë icro-enterprises, which employ less than

5 full-time staff (or equialent number of
part-time positions). This inclues
self-employe people who work on their
ë Small businesses, who hae between 5
an 19 full-time (or equialent) staff.


ë eium businesses, consisting of firms

employing 20±199 people.
ë arge firms consist of businesses with
two hunre or more staff.







sually only 1 or 2 owners
ë inancing proie by the owner
ë The business has limite market share
ë ften has a limite life span
ë Sometimes run on a part-time basis
ë There is a low leel of net profit


ë imite prouct or serice offering

ë requently is a home-base business
ë eographically limite to one or two
ë s often a family-base business
ë s only locate in the priate sector


ompare to large corporations, small firms

ten to:
ë ae more female owner/managers
ë ae managers with fewer qualifications
ë ae fewer unionise employees
ë perate for fewer hours each week
ë Be less likely to use formal management
improement an planning techniques


ë Be less likely to access goernment

ë Be less likely to eport
se less eternal financing
ë Be less likely to want to grow bigger
ë Be more likely to fail


ë Being your own boss

ë an align personal goals an interests
with work
ë otential financial rewars
ë roie support/jobs/opportunities to
family members


ncertainty, ambiguity an constant
ë Stress
ë otential for financial loss
ë ncrease responsibilities
ë ee to be multi-skille

ë ie common areas of failure:

± inance
± arketing
± rouction
± ersonnel
± ersonal

ë $   %& ! Any situation where a

business ceases to eist, such as firm
closure, liquiation, bankruptcy, sale or
transfer to another owner, or merger.
ë ecent research in Australia inicates
that approimately 7.5% of all businesses
eit each year.

ë The cumulatie effect is that about

two-thirs of all businesses still eist after
5 years, half are still traing after
10 years, an about one-thir remain
after 15 years.


Small firms are important to all national

economies because they proie:
ë mployment opportunities
ë The net generation of large firms
ë ompetition
ë nnoation
ë An outlet for entrepreneurial actiity


ë ports
ë Specialise proucts an serices
ë Support to big business
ë ecentralisation (economic actiity in
regional areas)


ë ore equitable istribution of economic

resources, wealth an opportunities
ë leibility in the oerall economy

ë Small businesses are a major economic

force in the acific im an aroun the
ë 5 million S s in A, representing
95% of all firms, an employing 60% of
the workforce

# (  )

ë ntrepreneur:
± iscoers/generates, ealuates an
eploits new business opportunities
± starts or grows an enterprise base on
these ieas
± as alue to society base on their
inepenent initiatie.

# (  )

ë ot all small business owners fit this

category. any small firms o not
actiely seek out new ieas or business
ë The terms frequently oerlap, but are not
always synonymous.


ë There is no single efinition of what

constitutes a small business, an a
ariety of both qualitatie an quantitatie
factors can be use to separate small
firms from other businesses.

ë Small firms share a number of typical

characteristics that separate them from
other types of business organisations.
These inclue a smaller market share, a
small ownership base, a limite life span
an limite net profit.

ë The aantages of owning a small

business inclue the freeom to pursue
one¶s own goals, fleibility an personal
achieement. The isaantages inclue
an increase eposure to uncertainty an
risk, financial loss an personal stress.

ë Small businesses are a major economic

force throughout the acific im region.
ë The concept of small business
management iffers from the concept of