Characteristics of Small Businesses and Their Owners - Coursework Example

CHARACTERISTICS OF SMEs AND SMALL BUSINESS OWNERS NAME INSTITUTION COURSE DATE ‘ Abstract Small businesses are generally defined as businesses that are practiced in small scale, and their main characteristics include; few employees, low sales volume and low market share. Small businesses make up a large percentage of the economy’s businesses. This paper looks into the characteristics of small businesses and also looks into the characteristics of the small business owners since not all people have the personal traits and abilities to venture into the small business field. Characteristics of Small businesses and small business owners A small business can be defined as a small scale enterprise which is run by its owners. The owners are the ones who fund it, manage it and operate it and it is considered to be an independent firm. (Solomon, 2011) The number of staff employed by the small business owners to run the business is in limited numbers since there are not many positions to fill in in a small business. The assets owned by small businesses are not many and the financial resources available for the business are limited since most of the financial resources come from the owner of the business. (Longenecker et al, 2005). Examples of small businesses include sole proprietorships, privately owned corporations and partnerships. Characteristics of small businesses Small businesses have certain characteristics that are easily distinguishable from large businesses. Barnes (2007) looks into some of the characteristics of small businesses: When it comes to the market and the customers in the small business industry, communication that exists is very fast and highly responsive. This is because the owners of the business come into first hand contact with the market and its customers. When it comes to the human resource perspective of the business, there are few number of employees. This means that the relationship that exists between the staff and even the owners is that of a close-knit nature since there is a lot of interaction that goes on between them. On the culture that exists in the work environment, there exists a unified sort of a culture. This makes it very easy to implement some change in the business. However, there can be the existence of dictatorship sine the owners of the business are the ones with the power to make decisions and they hardly make any consultation with the staff members of the business. When it comes to the organizational structure, there is quick decision making since the owners are the ones who make decisions for themselves and the decisions that are arrived at are quickly implemented (Armstrong, Forgarty & Dingsdag, 2007). There are plenty of other characteristics of small businesses that exist that are discussed by Schaper (2004) and they include: Small businesses usually have one or two owners and these owners are most likely to be family members since most small businesses are family based with a high number of them being a home-based sort of a business. Financial resources are provided by the owners of the business. This usually results in the existence of limited financial resources and also limited assets for the business. Time frame. Small businesses usually have a short term time frame. This means that they have a short life span since they are mostly based on one idea and once it is accomplished, the business has met its goals. Low net profit. Small businesses are known to reflect low levels of net profit since they are mostly based on a small scale proportion. They also have limited products and services to offer to the market and so they tend to have a low market share. Goals and objectives of a small business are usually personalized. Moreover, the personal interests of the owners directly affect the business. Managerial skills. The managerial skills are informal in nature since the very few of the owners who run the business will actually have any formal training on how to run the business. Characteristics of small business owners Not every person can identify an opportunity and venture into it to open up a small business venture. This can be done by certain people who have certain characteristics or in light terms, by those who have small business blood in their system. Rauch (YEAR), explains that there is a relationship between one’s personality and their entrepreneurial skills. Moran (1998) generalizes some of the characteristics of small business owner-managers. They tend to have strong leadership orientation with strong drive, they are action oriented and a have a great liking for constant decision-making. They tend not to enjoy being in a purely administrative role and do not tend to value order or system since this allows for innovation. Rubin (2010) looks into the six main characteristics that small business owners share. They include the following: a) Creativity A small business owner has to be creative in nature. This means that he/she has to have the ability to identify new opportunities and also have the ability to come up with new ideas that are set to be useful to start up a business or even to help an already existing business flourish. Creative thinking helps solve problems that arise within the business. b) Curiosity Small business owners are very curious in general and are always asking questions that concern the line of their business. They always want to know how they can innovate the products and services that they provide, how they can motivate all their employees, how they can satisfy their customers and also what their competitors are up to so that they can keep up. c) Self-fulfillment Small business owners tend to have the desire to be in control of their own businesses. They like to know that they can make their own decisions without the influence of others. They also like to know that they have a control of the personal income that they get form their businesses. d) Action-oriented Small business owners always have a need to set themselves apart from their competitors in the same field and are highly motivated to stand out in their field. They also seem to be least worried about the ruling status of the economy. They are noted to be further motivated by any form of misfortune that faces their business. The six main characteristics are not the only ones that can be linked to small business owners. Peavler (2011) also looks into other characteristics that are a common feature in the small business owners. e) Collaboration Small business owners have a very high ability to collaborate. Collaboration is an important trait when venturing into small business. This is because it is essential in creating good teams and also in coming up with ways to keep the teams highly motivated. The small business owners are well skilled when it comes to delegating the tasks of the business to the other team players in the business. They also know how to establish strong relationships between them and their employees. For example, a business owner might delegate a certain task to be done but instead of leaving it wholly to the employee, he helps them out but not in a dominating manner. f) Future- focused Small business owners are long-sighted and they set out their plans ahead or in advance. These plans include setting out the cash flows that they expect the business to generate. They also draw out their succession plans in advance since they want to ensure that if for any reason or another they are not able to carry out the objectives to the end, they have someone to take over for them and to achieve their business goals. They also set out the day-to-day running plans of the business that they believe if followed up, the business is bound to produce good results even in many years to come. For example he business owner perhaps can draw out a succession plan that specifies which daughter or son will take over the business should anything go wrong. g) Tech-savvy Small business owners ensure that they keep up with the latest technology as they know that technology will help their business to be more efficient and reliable. To ensure that their business is updated in regards to technology, they ensure that they open up websites for their businesses. Using these websites, they can keep track of how their products and services are performing in the market since they can keep up with the customers in an online mode. (Jansson, 2009). A new toy company can open up a web address where the clients can order for toys online. This makes the work easier and the company can also keep good track of their sales. h) Independence They should have a strong desire of independence. They desire to be unrestricted in that is why they do not desire to work in large organizations. They desire to be their own bosses and they also desire to be the ones to dictate their own incomes. You will find that a potential small business owner will quit a lucrative job in a large organization so that they can start up their own business Initiative They usually harbor a strong sense of initiative. They like starting up businesses using their own ideas and they are bound to use their abilities to the greatest extent provided that they are beneficial to the business. Dedication They have a great dedication to their businesses. You will find that small business owners are willing to dedicate all their time and all the financial resources they can get to their business as some business owner will work overtime and in the middle of the night trying to ensure that their business succeeds. Conclusion From the above analysis, it is evident that small businesses have their own distinguishing characteristics. Having these characteristics is a sure way of ensuring that a small business prospers. Right from the owners who are in charge, it is extremely crucial that the desire of success is instilled within an individual. References Armstrong, D. B., Fogarty, G. J. & Dingsdag, D. (2007). ‘Scales measuring characteristics of small business information systems', in M Toleman, A Cater-Steel & D Roberts (eds), Proceedings of Research, relevance and rigor: coming of age: 18th Australasian Conference on Information Systems, Toowoomba, Qld., 5-7 December, University of Southern Queensland, Toowoomba, Qld. pp. 163-171. Banes, L. (2007). Summary of Characteristics of Large vs. SMEs. DBA Submission. Newcastle University. Jansson, Y. (2009). “What Entrepreneurial Characteristics to Possess to Succeed.” Home Business Journal. Jeffrey, L.M., Hide S. & Legg, S. (2010). "Learning characteristics of small business managers: principles for training", Journal of Workplace Learning, Vol. 22(3), pp.146 – 165. Longenecker, J.G., Moore C.W., Palich, L.E. & Petty, J.W. (2005). Small Business Management: An Entrepreneurial Emphasis. Cengage Learning, New York. Moran, P. (1998). Personality Characteristics and Growth orientation of the Small Business Owner manager. 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