Characteristic Of A Small Business

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CHARACTERISTICS OF A SMALL BUSINESS

 

Small businesses bear the following characteristics:-

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·         Low capital investment – Small enterprises require less capital to start and run than large enterprises.  This makes them easier to start than large organizations.

·         Find it difficult to raise funds- Few financiers have confidence in the small enterprise which are considered as more risky than large organizations. Further more many of them lack the collateral required by some commercial banks to support the loans given.  This puts them at a disadvantaged point compared to the large organizations.

·         Informal structures- They have less formal structures than large organizations and few management levels.  This makes communication between the owner/manager and the employees faster.  This facilitates quick decision making giving them an advantage over the large organizations.

·         Have few employees- mostly operated by family members with the help of few employees if any.  The employees closely identify with the business.  There is therefore low personnel turnover.  The management of the human resources is therefore less complex than in a large organization.

·         The owner makes most of the decisions – The owner has personal influence on what takes place and rarely delegates. This means that the owner keeps in touch with all the happenings of the business which may be an advantage.  However owner could miss out important contributions from gifted and knowledgeable employees if not careful to involve them where necessary.

·         Specialization is rare- the owner and employees perform a variety of tasks.

·         Have few strategic issues than large organizations – Rarely have long term plans and decisions are more reactive (to deal with issues at hand) than proactive.

·         Inadequate quantitative data/information – small businesses rarely do research, may be because they do not appreciate the need or cannot afford.  Their decisions are therefore rarely based on quantifiable facts and can easily be misleading.

·         Close and direct contact with customers – Most small businesses entrepreneurs know their customers well and so can easily know their needs and meet them.

·         Flexibility – Small enterprises are more flexible than large organizations.  This is facilitated by their informal structures, low capital investments and direct contact with the market.  They can easily identify changes in the market and quickly re-channel their resources to meet the changing demand.

·         Small market share – Their market share is usually not large enough to influence the market prices.

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