The Nature Of Small Business 6q6f15

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The nature of small business

R ë efining small business ë haracteristic features of a small business ë The economic significance of the small-business sector ë ntrepreneur or small-business owner-manager?

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 entrepreneurship



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! 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.

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" 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)

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" criteria for small business: ë The owners make most ecisions an are not answerable to anyone else (owner-managers) ë The business has a small market share

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" 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 owner/manager(s)

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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 own. 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. R



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ë ë ë ë ë ë

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

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

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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

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

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ë Being your own boss ë an align personal goals an interests with work ë otential financial rewars ë roie /jobs/opportunities to family



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

Î ë ie common areas of failure: ± inance ± arketing ± rouction ± ersonnel ± ersonal

Î 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.

Î 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.

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' 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

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

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ë ore equitable istribution of economic resources, wealth an opportunities ë leibility in the oerall economy

ß ë Small businesses are a major economic force in the acific im an aroun the worl ë 5 million S s in A, representing 95% of all firms, an employing 60% of the workforce

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' #( ) 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.

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' #( ) ë ot all small business owners fit this category. any small firms o not actiely seek out new ieas or business opportunities. ë The frequently oerlap, but are not always synonymous.

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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 entrepreneurship.