Advantages and Problems of Small Businesses - Coursework Example

Small business Abstract This article begins with describing small businesses in general. It then proceeds and discusses some of the advantages associated with running such a type of entities in comparison to formal employment. We have also discussed some of the problems faced by small business operators and also included modern marketing initiatives that small business operators can implement in their micro enterprises. The brief has concluded by providing an outlay on some of the characteristics that a business person should possess so that their small businesses can become more competitive. What are small businesses? Small businesses are basically enterprises which are privately owned and operated with a small bunch of employees. These organizations normally transact low volume of sales and they can either be privately owned, partnerships, or sole proprietorships. Its legal definition varies depending with the entities country of operation. For instance, in the UK a small business is an organization with fewer than 50 employees and in the US it is any entity with less than 500 employees. These micro enterprises can also be classified according to other methods such as net profits, assets, or sales revenues. Advantages of small businesses These establishments can be started with very minimal capital outlay and they can also be run on a part time basis by their owners. This kind of money can either be borrowed or financed from crediti institutions (Root, Koenig, 2006,p.80; Timmons, Spinelli, Zachara, 2004,p.164).Such entities are also perfectly suited to internet marketing because their areas of specialization easily serve specialized niches (Analoui, Karami, ,p.130). Small businesses provides a lot of independence to the owner and this has been cited as the main reason as to why entrepreneurs make the decision of becoming their own boss (Longenecker et al.2005 ,p.8) Another reason is that entrepreneurs also have the desire to make personal decisions, take personal risks. Small business owners have to work for very long hours so that they may meet their client expectations (Mask, Martineau, Gerber, 2010, p.103; Gray, 1998, p.137). Problems faced by small business These enterprises are mired with a number of problems which are all related to the size and nature of the business. To begin with, one of the frequent issues cited as an impediment to such entities is undercapitalization (Fingleton, Eraydin, Paci, 2003,p.261; Corbetta, Huse, Ravasi, 2005,p.68; OECD, 2008,p.53) This occurs as a result of poor planning when starting the business and it is therefore advisable for any prospective entrepreneur to have liquid cash equal to the projected revenue for the first year in the business. This amount should be exclusive of any anticipated expenses. For instance, if an entrepreneur projects that the business is going to generate $300,000 in revenues during its first year of operation, and the same entrepreneur also estimates that the start-up expenses will be in the region of approximately $100,000 then the business person will require at least $400,000 in start up capital alone. Failing to provide this capital might leave the business owner vulnerable and liable for businesses that might eventually take him/her in a court of law (Steingold, 2011, p.144). According to Mazonas (2005, p.199) other critical issue is finance either in terms of overdraft facilities or fiancé for expansion. However, this is usually brought about by the urge for faster expansion than the internal cash flow can permit because of a belief in the inadequacy of certain capital markets such as the one in the U.K (Bartlett, 2008,p.93). Marketing the small enterprise Getting new customers is the number one challenge facing small business owners and in order for these entities to nurture continual stream of new business they have re-organize their marketing initiatives on a regular basis (Lipe, 2002, p.12). Some of the common marketing techniques for these types of business may include; internet, e-mail marketing, print, billboards, radio, television, yellow pages directories, and word of mouth among others. A good number of businesses use techniques such as ad sense, niche sites, and search engine optimization to reach potential clients (Antion, 2005, p.207). Characteristics of business owners It has been suggested that individuals venturing into business are people who are prevented from participating actively in the labor market either for medical or caring reasons. These are the unemployed, retired, and long-term sick. Therefore small business might be a way perhaps the only way in which certain individuals can become economically active, however, this is not the case (Mason, Carter, Tagg, 2008, p.36). According to Kapila (2006, p.16), small businesses can grow through increased use of both financial and non-financial services, deep market, better prices, and business linkages. Therefore for these enterprises to thrive there should be Adequate financial services Access to proper infrastructure Certain degree for security of tenure Access to business and technical skills Affordable tools, raw materials, and inputs Degree of regulatory compliance Above all there should be motivation from the business owner which requires certain characteristics from the individual themselves. Key traits required in small business entrepreneurship Even though there is no set of characteristics which describes all business owners, not all of them exhibit the same exact set of characteristics. However, there are certain characteristics which seem to be present with most entrepreneurs. These people should also be curious because such personalities demand creativity or innovation so that these people can see every obstacle as an opportunity hence turning it into a competitive advantage for themselves (Awe, 2006, p.2). Self-esteem/Self confidence A good number of business owners are always certain of their moves and they have the ability to honestly believe that they can and will succeed at their task. Entrepreneurs believe that if they continue working hard enough they are likely to break though and succeed. Determination A good number of business owners are singularly focused on accomplishing certain tasks and they continue with their efforts until that particular task is finished and success accomplished. Most business owners tend to shut out the outside world (TV, radio, and other idle conversation) and solely focus on tasks at hand. This single mindedness often mislead people into assuming that entrepreneurs are unfriendly, rude, and self centered because such kind of people rarely involve themselves with the surroundings. It is this ability to be determined and hungry for success than enables business owners to expediently finish the task at hand (McDaniel, 2002, p96). Persistence/Diligence to keep trying A good number of business owners have the attitude of trying which they are required to keep on maintaining until they succeed. A good example is Henry ford whom had not been successful in his previous ventures with machine shops and small engines, in which later on he decided to build an automobile in masses which later on developed the benchmark of mass production process. Colonel Sanders also came out of retirement find the most successful quick food chicken restaurant franchise in the US. This clearly shows that most successful business owners do not succeed the first time, but their persistence allows changes which ultimately lead the businesses into success. Willingness and ability to take calculated risks Business owners are risk averse people and they usually minimize risk in order to undertake a task. Such people will stand ready and willing to accept their calculated risk as necessary to become successful. Creativity This is mainly the ability to see things differently. A shrewd business person would see a product that is not currently available but can be viewed positively by the consumer. The creative guys have the ability to see the end result of a production change in order to make the entire production process smoother. In addition to the above, such individuals have other characteristics such as Business people are action oriented, highly motivated and they take risks to attain their goals They accept responsibilities with enthusiasm and endurance They have self confidence, always dedicated, setting self determined goals and markets for their ideas responding to existing markets Conclusion With the global financial turmoil where iconic companies are laying off employees and at the same time key world economies are shrinking and most jobs are either being taken to china or outsourced to third world countries such as India, it is very difficult to secure employment and worse of it a well paying job. This calls for entrepreneurship spirit from different people regardless of race, status or age. Most of the global companies today began as small businesses, and it is only with the right attitude coupled by proper management that such micro enterprises have the potential to transform themselves as true leader. When these companies are started and they are transformed as global leaders, they do not only provide employment to the locals but they also inject some corporate tax directly into the economy. This has a multiplier effect because the economy expands, jobs are created and there are also other indirect benefits which can only be felt at the supply chain level. References Benard Fingleton, Ayda Eraydin, Raffael Paci, 2003, Regional economic growth, SMEs, and the wider Europe, Illustrated edition, Ash gate Publishing, Limited. Bruce A. McDaniel, 2002, Entrepreneurship and innovation: an economic approach, illustrated edition, M.E Sharpe. Clate Mask, Scott Martineau, Michael E. 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