Small

Business
Management
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 Small Business vs. Large Business
The common standard used to distinguish between large and small businesses is
the number of employees. Other criteria include sales revenue, the total value of
assets, and the value of owners’ equity.

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 Secrets of Small
Business Success

“
In fact, the form of competition between large and small companies is part of
the relationship between them, and for the most part depends on cooperation
through the supply chains that link them directly and indirectly.
Every large company needs many small companies that provide services or
products that support its activity
Large Companies rely on these small businesses as providers of materials,
semi-products, finished products, and services — to keep up with work
demands—a symbiotic relationship exists between them.
Small businesses perform more efficiently than larger ones in several areas. In
running a small business, if they identify their competitive advantage, remain
flexible and innovative, cultivate a close relationship with customers, and strive for
quality, their business would have a better chance of winning.
For example, although large manufacturers tend to enjoy a higher profit margin
due to their economies of scale, small businesses are often better at distribution.
Most wholesale and retail businesses are small, which serves to link large
manufacturers more efficiently with the millions of consumers spread all over the
world. 5
 OECD and EU Russia
has three categories: (i) ‘micro’ (1–9 employees, <€2 classifies firms into ‘small’ (<100 employees
m assets and <€2 m turnover) (ii) small business (10– and < RUB 400 m turnover), and ‘micro’ (<16
49 employees, <€10 m assets and <€10 m turnover), employees and < RUB 60 m turnover)
and (iii) medium business (50–249 employees, <€43 mChina
assets and <€50 m turnover).
Ihas two categories: (i) small
in the United business (<300 employees
and <RMB 20 m turnover),
States
and (ii) medium business
in Singapore
SME is any firm with fewer (<1000 and <RMB 400 m
than 500 employees if it is in turnover). SME is a firm that has fewer
manufacturing, and less than than 200 employees and less than
US$5 million in annual sales SIN$100 million in assets
revenue if it is not
in Australia
SME is a firm with fewer
than 200 employees

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in Australia
SME is a firm with fewer than
200 employees
Russia
classifies firms into ‘small’
(<100 employees and < RUB
400 m turnover), and ‘micro’
(<16 employees and < RUB 60
m turnover)
IFC definition of small firms
in the United
States
SME is any firm with fewer
than 500 employees if it is in
manufacturing, and less than
US$5 million in annual sales
revenue if it is not
China
has two categories: (i) small
business (<300 employees and
<RMB 20 m turnover), and (ii)
medium business (<1000 and
<RMB 400 m turnover).
in Singapore
SME is a firm that has fewer
than 200 employees and less
than SIN$100 million in assets
OECD and EU
has three categories: (i) ‘micro’ (1–9
employees, <€2 m assets and <€2 m
turnover) (ii) small business (10–49
employees, <€10 m assets and <€10 m
turnover), and (iii) medium business (50–
249 employees, <€43 m assets and <€50 m
turnover).
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 Small business size standards vary by the industry

within which the business operates: construction,

manufacturing, mining, transportation, wholesale
trade, retail trade, and service.
Small businesses' definitions vary by industry. These
definitions are based on annual sales revenues or
number of employees, and it considers the following factors:
• Industry structure analysis
• Degree of competition
• Average firm size
• Start-up cost
• Entry barriers
In general, manufacturers with fewer than 500 employees are
classified as small, as are wholesalers with fewer than 100
employees. 8
Defining Small Business
Small business must have at least two of the following features:
• Management is independent, because the manager usually owns the business.
• Capital is supplied and ownership is held by an individual or a few individuals.
• The area of operations is primarily local, although the market is not necessarily
local.
• The business is small in comparison with the larger competitors in its industry

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small business
one that employs fewer than 100 people.

Gazelles
small companies that are growing at 20 percent or
more per year in annual sales; they create 70 percent
of net new jobs in the economy.

Mice
small companies that never grow much and don’t
create many jobs.
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Entrepreneurs vs. Owner-Managers
Business Entrepreneur is an individual who establishes and
manages a business for the principal purpose of profit and
growth. The entrepreneur is characterised principally by
innovative behaviour, and will employ strategic management
practices in the business.

Small business owner … an individual who establishes and

manages a business for the principal purpose of furthering
personal goals. The business must be the primary source of
income and will consume the majority of one’s time and
resources. The owner perceives the business as an extension
of his or her personality, intricately bound with family needs
and desires.
The Start-Up Process
Entrepreneurship process
The stage of a business’s life that involves
innovation, a triggering event, and
implementation of the business.
Small business management process
The stage of a business’s life that involves
growth, maturity, and harvest.
 A Model of the Start-Up Process

Growth A point at which an adequate living is provided for the owner and
triggering event A specific event or occurrence that sparks the family, with enough growth remaining to keep the business going.
entrepreneur to proceed from thinking to doing.

Implementation The part of the entrepreneurial process that

occurs when the organization is formed.

Motivations for growth

Maturity The stage of the organization when the business is considered
well established.

Harvest The stage when the owner removes him or herself from the
business. Harvesting a business can be thought of as picking
the fruit after years of labor.
Enhancing the Capacity of Small Business
governments have two broad mechanisms to assist businesses:

• Macroeconomic policies, which include interest rates,

regulations, taxation, the legal environment, and national
infrastructure.

• Direct intervention, by designing policy and programs that

directly assist businesses to achieve set policy objectives.

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Some Unique Contributions of Small Business

• Encourage innovation and flexibility.

• Keep larger firms competitive
• Develop risk takers
• Generate new employment
• Maintain close relationships with customers
and the community

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Some Current Problems Facing Small Businesses

• Political and economic issues.

• World economy.
• Retirement or transition.
• Capital or financing issues.
• Unexpected growth.
• Succession.

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Inadequate Financing

• It cannot be stressed enough that a shortage of

capital is the greatest problem facing small
business owners.
• Without adequate funds, the small business
owner is unable to acquire and maintain
facilities, hire capable employees, produce and
market a product, or run a successful business.

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Inadequate Management

• Many owners tend to rely on one-person

management and are reluctant to release
control, or to delegate responsibilities.
• They and may not select qualified employees,
or may fail to give them enough authority and
responsibility to manage adequately.

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Some Current Trends Challenging Small Business
Owners

• Exploding technology
• Occupational and industry shifts
• Global challenges

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Why People Start Small Businesses
• Satisfying personal objectives.
• Achieving business objectives.
• Achieve independence.
• Obtain additional income.
• Help their families.
• Provide products not available elsewhere.

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Achieve Business Objectives, 1
Objectives
• The goals toward which
the activities of the
business are directed.
• Service, profit, social,
growth.

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Achieve Business Objectives, 2
Social objectives
• Goals regarding providing a
service to the community, and
doing their part in environmental
protection.
Profits
• Are the reward for accepting
business risks and performing an
economic service.
• Are needed to ensure the
continuity of a business.
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