Characteristics of Small Business Owners - Coursework Example

Running Head: SMALL BUSINESS OWNERS AND CHARACTERISTICS Small Business owners and characteristics Insert Name Title Date Small Business owners and characteristics Introduction Small business are those whose operation and ownership is taken as private. They always employ fewer people and their sales volume is normally low. These businesses in most cases are sole proprietorships, partnerships and corporations with private ownership. Small businesses are defined differently from country to country and this definition depends on the industry Kirwan (2010).Small businesses can be found in many countries and their existence normally depends on the economic system being used in the operation of the businesses. Classification of small businesses is also done depending on the net profits, sales and assets. There are many other aspects used to define small businesses as discussed below. Nature of small business Small businesses are defined using a number of parameters. One of the parameters is independence. For a business to be classified as small it must be independent. In that respect a branch of another major business or a subsidiary does not qualify to be called a small business. Examples of small businesses include hair dressers, programming and web design, manufacturing on small scale, small shops like bakeries, convenience stores, accountants, tradesmen, photographers, guest houses and restaurants among others Longenecker et al (2008). Another nature of such kind of a business is that it is never a monopoly. It does not dominate other businesses in its industry of operation. The industry may have many sellers but the actions of any of them do not affect the other sellers materially. The most common parameter applied by people to define small businesses is the number of people employed in that business or the size of the firm. However defining a business with its size is tricky since the number of employees in a small business varies from country to the other. For example In Australia the ‘Fair Work Act 2009’ accepts 15 or less employees to form a small business. The European Union allows for 50 or lesser employees while in America a business with 500 or fewer employees does not qualify as a large business Hutchinson Fleck and Lloyd (2009). With a survey around the world, many businesses have 20 employees or less. This makes 50 employees a reasonable limit for any small business. Again, businesses that have over 50 people employed in them use managerial and operational techniques that are almost the same as those used in the large businesses Kirwan J. (2010) A business with not more than five employees may not qualify even as a small business since it cannot be analyzed. It is a micro business. If the number of employees is not more than ten the business may not be having even the minimum managerial and operational structure that a small business must have Kearney, Hisrich & Roche (2009). The business can also be classified depending on the age of the firm. The age of the business is taken to be the time the business requires for forming a managerial and operational structure. For a new business venture to reach its profitability level it needs about eight years on average. The eight year mark is arrived at depending on factors like the industry in which the business has been established in and the capital used initially to begin the business. Profitability is just one among many measures that can be used to determine the type of a business. Generally a business is taken as new or small if it has been in existence for less than five years Kearney, Hisrich & Roche (2009). Annual revenue is also a common measure of determining if a business is small or not. With the annual revenue parameter the industry where the business is found must be defined. Different industries may have differences in the revenues for small businesses. The revenue source is regarded with a lot of significance. Revenue gained from the sale of labor or knowledge can in no way be compared to revenue from goods. For instance, if a car dealer generates revenue of US $5million annually this revenue should receive totally different treatment from the same amount of revenue produced by a consultancy firm. For many of the small businesses dealing in retail, wholesale and manufacturing industries ten million dollar revenue can be used to set the higher limit. This set limit should go with the limit for firm size which has been set at 50 employees Hutchinson Fleck and Lloyd (2009).Small businesses have a bigger percentage of their employees making services and goods for the company. Sales roles, administration and management are done on a lower scale when compared to the large firms. Small firms are also known to employ people with lower levels of education. English (2010) observes that due to the low revenue levels attained at the beginning of the business the wages and salaries paid to employees may not be big enough to attract highly qualified personnel. People with bachelors or masters degrees may be totally absent or very few compared to those with college or high school qualifications. Majority of small businesses employ people of age 25 or less who are yet to establish themselves in their professions and are yet to earn the experience required by large firms. Small businesses depend on various sources for funding. They get their money from personal savings, grants, loans from relatives and friends, banks, partnerships and many others Curan (2000). Characteristics of small business owners Small business owners are expected to have some traits which can make them succeed since they may have many hurdles to jump. They need to be hard workers since to begin a small business is one of the hard things that people do. Such people should be in a person to stay up late and work, come early and be ready to do things with their own hands in order to cut down expenses. For small businesses to be successful it requires that their owners to understand whatever can be possible, and be in a position to take risks that they have calculated and create solution in areas where there are weaknesses. The business owner must have a vision for the business and have a self awareness for it Hjorth and Steyaert (2005). A small business owner must be a risk taker since at the time of beginning the business the entrepreneur may not have sufficient and right information to help in decision making. Smart people wanting to own small businesses will therefore need to “have an aptitude for making calculated risks based on the limited information that is available.” The decisions made in such circumstance normally have long term effects on the growth and success of that business. Over and above risk taking the business person must be high in his level of self confidence. It takes a lot of self confidence for one to believe that it is possible to go alone and succeed Stephenson (2008). Small business owners always understand that they are limited in various ways. Any person dealing in a small business must have an understanding that they have limitations when it comes to getting financing or expertise and skill sets. Successful entrepreneurs must be willing to seek help form external experts. Small business dealers should be people with the ability to learn from their mistakes since all entrepreneurs are prone to making mistakes. Entrepreneurs that are geared towards success are always ready to learn from past mistakes. Failure to learn these lessons can make a business fail to avoid similar mistakes when they come in future Morris, Fargher (1974). A person owning a small business should be able to promote himself or herself and the business shamelessly. This is necessary since the business needs a lot of marketing and it depends on its founder. Theses people must have a positive image for business learn to know their customers. They should be wise managers of money who do all things seriously. It is necessary for such a business owner to have a sense of focus and not be a person who wants to do everything at the same time. One should to do that which they enjoy most. This helps one to achieve most in one area of focus English (2006). Conclusion In conclusion small businesses are classified depending on a number of parameters which distinguish them from the large businesses. Some of these things are the size of the firm, the number of employees, the annual revenue, and age of the business, independence and the industry in which the business is being operated in. these parameters will tell if a business has reached the level of small business or if it has crossed into the category of the large businesses. Business people dealing in the small businesses have characteristics that match the tough nature of the business. Since the small business begins as a delicate venture with so many pitfalls it calls for a certain breed of people. These people are normally risk takers, hardworking and understand their weaknesses. They must be visionary and ready to learn from past mistakes if their businesses are to succeed. References English, J. (2006) How to Organize and operate a small business in Australia; How to turn ideas into success, Allen and Unwin, Crows Nest. Morris P., Fargher J. (1974) Achievement drive and creativity as correlates of success in small business; Australian Journal of Psychology 26(3) 217- 222 Longenecker, Justin, G. Carlos, W. Moore, J. Petty, W. Leslie, E. Palich (2008) Small business management: launching and growing entrepreneurial venture (14th ed.) Cengage Learning p. 768. Craig M. (2007) The value of business, MC. Graw Hill. New York. Stephenson, J. (2008), The Ultimate Home Based Business Handbook; Entrepreneur Press. Tulman C. (1992) Becoming the Small Business Owner; An analytical Perspective, Oxford University Press London. Kearney C. Hisrich R. & Roche F. (2009) Public and private sector entrepreneurship: Similarities, Differences or Acombination? 16(1) Karise H. Fleck E. & Lloyd L. (2009), An investigation into the initial barriers to internationalization: Evidence from small UK retailers 16(4) Curran J. (2000) Journal of Small Business and Enterprise International Small Business Journal; Emerald, April 1. Marx, M. (1994) The problems of starting a small Business; About The Pitfalls, Penguin 14(2) 12-16 Hjorth D. and Steyaert C. (eds) Narrative and Discursive Approaches in Entrepreneurship: A Second Movements in Entrepreneurship Book. Cheltenham: Edward Elgar, 2005. English J. & Babette M. (2010) Managing a small business in Australia; The Complete Hand Book, Allen & Unwin, Crows Nest. English J. & Babette M. (2009) Discovering new Business Opportunities; Allen & Unwin, Crows Nest Griffiths A. (2006) 101 Ways to Advertise your Business, Allen & Unwin, Crows Nest Coffer, F. (2009), The Small Business Entrepreneur, Growing a New Business; Cromer Press 13(4) 14-21 Hawkins B. & Wing L. (2010) How to Start a Business when you are Young; Get the right idea for success, A&C Black; London Kirwan J. (2010) Good Small Business Planning Guide; How to get your business off to the best possible start, A&C Black, London Mc Kenzie K. (1996) The Qualities of a business pioneer in the 21st Century, Development House Press; Toronto Read More