Small Business – Business Activity Formed at Your Own Risk Essay Example
Small Business – Business Activity Formed at Your Own Risk Essay Example

Small Business – Business Activity Formed at Your Own Risk Essay Example

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  • Pages: 4 (985 words)
  • Published: April 6, 2017
  • Type: Essay
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Small business means the size of which is not big- the size again depends on the yardstick one uses to measure. What is small to one may be medium or even big to some others. Small business is an integral part of the total business scene in any country.

What characterizes small business? According to Small Business act 1934 - A business which is independently owned and operated and not dominant in its field” is a Small Business. The small Business Act of 1953 defines small business as “one which is independently owned and operated and not dominant in its field of operation. ” Though small in size such business activities cover almost any area of business viz. manufacturing, mining, wholesaling, retailing, service and the like.

According to executive committee for national economic development-A Small Business one of which process at least two of

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the following characteristics:

  • Managers are the owners,
  • Capital supplier and the owner is individual or a small group,
  • Worker and the owners are local, market may not be so.
  • Relatively smaller compared with the biggest unit of the industry [Sales, employees etc. ]

From all of the above definitions we can make a general definition of Small Business- “A business not dominating in its field, does not engage in any new marketing, workers are local, working at a single location, produced units are relatively small in size, and often all organized by the owner or his family members. Definitions in the Context of Bangladesh: “Small industry means an industrial establishment or unit which is rum mainly by hired labor and not using mechanical motive power but does not normally employ more than 50 wor

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and whose land, building and machinery does not exceed Tk. 150, 00,000 in value in either case. ” –  E. Pakistan Small Industries Corporation Act of 1957. Definition Stated By The Bangladesh Bank The central bank of Bangladseh has come up with a new definition for small and medium enterprises in line with the government's industrial policy of 2010.

The new definition replaced the previous ones formulated in May 2008, incorporating microenterprise and cottage industries. Under the new definition of Bangladesh Bank, the Bangladesh Bank will deem an individual as an entrepreneur or a small business owner if the person is an owner or proprietor of a privately-run organization, or owns at least 51 percent of share in case of a joint venture or company listed with the Office of the Registrar of Joint Stock Companies and Firms. The central bank also included- microenterprise and cottage industries in all of its SME loan policies and programmes.

According to the new definition, In Manufacturing, Medium-size industry/enterprise Assets: Worth Tk 10 crore to Tk 30 crore (excluding land and factory building, but including replacement value) Employee No. : 100 to 250 workers. Small-size industries/enterprises Assets : Worth Tk 50 lakh to Tk 10 crore (excluding land and factory building, but including replacement value) Employee No. : 25 to 99 workers. Micro industry/enterprise Assets: Worth Tk 5 lakh to Tk 50 lakh (excluding land and factory building, but including replacement value Employee No. : 10 to 24 or less

In both services Industry and Businesses, The medium-size enterprises Assets : Worth Tk 1 crore to Tk 15 crore (excluding land and factory building) Employee No. : 50 to 100 workers The

small-size enterprises Assets : Worth Tk 5 lakh to Tk 1 crore. Employee No. : 10 to 25 workers Micro-enterprises: Assets : worth Tk 5 lakh or less(excluding land and factory building, but including replacement value) Employee No . : 10 or less. Cottage industries/enterprises Assets : Worth Tk 5 lakh to Tk 50 lakh (excluding land and factory building, but including replacement value) Employee No. 10 to 24 workers or less Ref: Tuesday, June 28, 2011 SME: new definition to herald new life, Pocket of Change, Business, The Daily Star Nature of Small Business:

  1. Small physical size
  2. Small investment size
  3.  Small employment size
  4. Management Style:?Hired or Self
  5.  Market Size: Limited ,Local or Wide

Foreign Small Business classifies the following types of businesses as small if they meet the criteria listed below:

  1. Manufacturing firms: A manufacturing firms is classed as small if it has 250 employees or less. Manufactures take raw materials and change into finished goods for sale.
  2. Services: Service firms with annual receipts of $2 million or less are classed as small. A service firm provides services for customers, and types of service firms including hotels, barber and beauty shops, all types of repair shops, plumbers, and electricians.
  3. Wholesaling: Wholesalers with annual receipts of $9. 5 million or less are classed as small. Wholesalers buy and resell merchandise sell in significant amounts to final consumers.
  4. Research ; Development: Firms engaged in developing newer methods, techniques of production, sales and software system can serve others who are in need of those.
  5. Consulting: Consultancy services with regard to efficient management, project appraisal, raising sources of finance, methods of reducing risk, technical and engineering services etc. are

provided through these types of firms.

  • Retailing: A retail firm is small if it has annual receipts of $2 million or less. A retail business is one that buys goods from suppliers and sells them to customers.
  • Typical kinds of retail firms are food stores, clothing stores, drugstores.

    Characteristics of Small Business Enterprises: There are various essential characteristics of small business. By characteristics small businesses are different forms of medium and larger business organizations. The widely identified characteristics of small business may be seen as under :

    Managed by the owner :

    • Decisions are taken at one point All risks borne by the owner
    • Little or no delegation of authority Extension of the entrepreneurs' personality
    • Verbal communication No separate entity
    • Independently run/managed.
    1. Family workers and or fewer hired worker
    2. Mostly owner financed and or limited borrowed funds with no access to the share market [no public issue]
    3. No scope for specialist service
    4. Unable to adopt modern technology
    5. Little emphasis on long term planning
    6. Volume of sales relatively smaller [limited market share]
    7. Size of investment is relatively smaller
    8. Close labor owner/ management relations.
    9. Requirement of minimum legal formalities
    10. No or limited use of innovative production/ marketing
    11.  Business is housed in small establishments
    12. Maximum possible safety of business secret.
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