Chapter 7

Small Business
Objectives:
To be able to:
 Define small business and its types.
 Elaborate the characteristics of Small
business.
 Discuss the advantages and
disadvantages of operating a small
business.
 What is Small Business?
* Small business are either services or retail operations like
grocery stores,medical stores,tradepeople,bakeries and small
manufacturing units. These are independently owned organizations that
require less capital and less workforce and less or no machinery.
* Small business is defined as a privately owned corporation,
partnership, or sole proprietorship that has fewer employees and less
annual revenue than a corporation or regular -sized business.
2 Kinds of
Small
Business
01 Very 02 The
small Bigger Small
business
Where the owner is the Business
principal worker, and he The owner mainly
employs one or more directs the work of
assistants. This is the the employees.
micro business.
Differences between
small and BIG
Enterprise
 SMALL BIG
ENTERPRISE ENTERPRISE
1. As a group, change through a cycle of 1. As a group, change through
births and deaths. expansion.

2. The risk or reward estimate is done by 2. The risk or reward calculation is done
the individual owner who either gets by employee- manager.
profit or loss.

3. It has little or no economic power. 3. It has tremendous influence on the

economy including the particular sector.
Characteristic
s of small
business
01
A small business is low in capital but high in

“
labor intensive.

A small business is efficient in specialized skill or

02
service. It can well produce goods or services that
are designed to the particular needs of an
individual.
03
A small business succeeds in a small isolated

“
or overlooked markets.

04
A small business often operates in unstable
markets.
05 “
Capital comes from the owner or small
group.
.

06
The area of operation is small. This means
the business is community-based.
07 “
A small business is closer to the market place. Not
a few small business conduct their operations right
inside the market place.

08
Generally, the owner of small businesses
are also the managers.
 Advantages
of small business
 3. Government
Incentives. The 5.
government Independence.
1. Personal extends both Small business
relationships financial and owners are the
technical masters of their
with assistance own destinies.
customers and particularly They are not
2. Flexibility in 4. Simple
employees. production and employees.
management. record
marketing to They make their
The owner keeping.
small own decisions.
being the boss entrepreneurs. Small
and manager,
enterprises
he can easily
require few
introduce
changes in his and simple
product and sets of
services. records.
Other Advantages
Independence Financial Gain
 Entrepreneurs are their  Entrepreneurship offers
own bosses. They a greater possibility of
choose whom to do achieving significant
business with and financial rewards than
what work they will working for someone
do. else.
Other Advantages
Control Prestige
 Entrepreneurs who  It offers the status of
are driven by passion being the person in
and creativity and charge. Some
possess a “vision” of entrepreneur are
what they aim to attracted to the idea of
achieve. being the boss.
Other Advantages
Equity Opportunity
 It gives an individual  Entrepreneurship
the opportunity to creates an opportunity
build equity which for a person to make a
can be kept, sold, or contribution. They help
passed on to the next local economy through
generation. innovations.
 Disadvantages
of small business
 1. Difficulty of
raising a
capital.
4. Lack of
opportunities 2. Risk of
for employees. failure.

3. Limited
management of
skills.
Other Disadvantages
Time Commitment Risk
 This leaves all of the  Even if the business has
duties and been structured to
responsibilities to the minimize the risks and
owner. Small- liability to the owner,
business owners risks can’t be
report working more completely eliminated.
than eighty hours a
week.
Other Disadvantages
Uncertainty
 Even though the business
may be successful at the
start, external factors such as
downturns in the economy,
new competitors entering the
marketplace, or shifts in
consumer demand may stall
the businesses growth.
Financial Commitment
 Even the smallest of
business ventures requires a
certain amount of capital to
start. Committing these types
of funds to a business
venture makes them
unavailable for personal or
family.
Other Disadvantages
Small Businesses Experience
Higher Costs
 Small businesses have
lower bargaining power
than their larger
counterparts, and this
hampers their ability to
lower the unit costs of their
products.
Small Businesses Have
Smaller Budgets
 Small-scale businesses are
typically faced by budget
hurdles. They can’t afford
the levels of research and
development, marketing,
and technology.
Other Disadvantages
Small Businesses Cannot
Compete on Price
 Small businesses cannot
compete with their larger
competitors on price is a
direct consequence of their
lack of bargaining power.
Small Businesses Have Less
Brand Recognition
 A large business enjoys
brand recognition wherever
it goes. A small company
won’t have the brand
recognition it requires to
easily gain more
customers.
Why Small Business
Fails?
 “
Mismanage
Lack of Lack of Wrong
ment of
experience money. location
inventory

Poorly Unsound or too

Poor credit little analysis in
planned
practices. choosing the
expansion. business.
 Economic
Contributions of
Small Business
 They They fill needs
They create They provide
introduce employment. competition.
of society and
innovation. big businesses.
Types of
Business
01 Retailers
 Whether you’re a
franchisee or an
independent store,
there are plenty of
uses for working
capital.
02 construction
business
 Whether it’s buying new
equipment or just new
materials, having capital
at your disposal is always
useful.
03 home Service
Professional
 With careers ranging from
contractor to cleaning
services.
04 Restaurants,
Bars, & Night clubs
 With a loan or merchant cash advance,
these industries would be able to do
things like refurbish customer- facing
areas, buy new kitchen or bar
inventory, or even expand with another
location.
05 whole sale
companies
 Use alternative funding to
purchase things like upgraded
warehouse equipment or even
new packaging.
06
Transportation
companies
 Working capital can be used by
transportation or trucking
companies to buy things like
brand new vehicles or even just
fixing up older ones.
07 real estate
companies
 Whether you’re buying ad
space or working to increase
your market.
08
Hospitality
companies
 Anything from chain hotels or
motels to B&Bs can use
working capital to refurbish
their rooms or update their
rooms or update their online
booking system.
09
manufacturing
Business
 Manufacturers of all types
can use business funding on
things like high- tech tools
or updated safety gear.
10
medical
offices
 Purchasing medical
equipment and hiring new
staff can be crucial to running
a medical office as effectively
as possible.
11
Franchises
 Getting the capital to open a
franchise can make all the
difference in your career.
12 minority-
owned business
 Alternative funding can be a
great way of promoting
economic equality.
13 Women
owned
business
 A crucial part of the
economy, women- owned
businesses may find
traditional loans harder to
obtain.
14 veteran
owned
business
 Small business loans and
merchant cash advances can
be a great way for veterans to
start, or expand, their
business.
 End of
CHAPTER 7
Thank you for
listening!