Understanding the General Nature of Small Businesses and the Characteristics of Small Business Owners - Essay Example

?Understanding the general nature of small businesses and the characteristics small business owners I. Introduction Small businesses are some of the most important pillars of the economy. In general, small businesses are flexible so it can move quickly and can go after opportunities easily as compared to big corporations (English, and Moate, 2009). Its small size creates a more environment-friendly workplace. However, small businesses also have a number of disadvantages including limited access to capital, limited market reach, mostly not growth and productivity oriented, and limited human resources (Gerber, 2001). Small businesses are usually sole proprietorship companies that are run by individuals or families. The success of small businesses largely depends on their owners and the resources available to them (English, 2006). There are many desirable characteristics of small business owners, namely (a) opportunity seekers, (b) risk-takers, (c) persistent, (d) committed to work, (e) goal setters, (f) information seekers, (g) knows how to demand for quality and efficiency, (h) good in planning and monitoring, (i) persuasive and knows how to communicate ideas, and (j) confident ((English, 2006; English and Moate, 2009; Deakins, and Freel, 2009). To get a clearer picture of how small businesses work and what important characteristics small business owners should have, let us discuss these things one by one. II. Characteristics of Small Businesses in General One of the main advantages of small businesses is flexibility and the ability to move quickly (Deakins, and Freel, 2009). Note that in small businesses, the owners are usually at the helm of the operations and can decide immediately on issues concerning the business. Also, in small businesses, there are very few management levels which make decision-making processes less complicated (Deakins, and Freel, 2009). Since small businesses are flexible, it can easily jump into certain opportunities. When it comes to production, small businesses are more flexible and can easily modify its products to meet the needs of the market. Note that in small businesses, production segments follow very lean structures and the levels of communication, both downward and upward are usually open so there is a continuing flow of information (Deakins, and Freel, 2009). This kind of open and fluid communication is usually absent in bigger companies so it takes longer time for bigger companies to decide on certain production issues and meet the demands of the market. Small businesses have many disadvantages but they also have disadvantages. One of the biggest disadvantages of small businesses is limited capital. Most small businesses are financed directly from the pocket of their owners so they do not usually have that much start-up capital (Gerber, 2001). Generating capital through bank loans may also prove to be quite a challenge for small businesses since they establishments do not have enough assets to serve as guarantee for loans (Gerber, 2001). In most cases, small business owners have to mortgage their personal properties to finance their businesses. Since small businesses have limited capital, these establishments may find it difficult to development their products properly and reach their target market efficiently (Gerber, 2001). Operating on shoe-string budget often takes its toll on small businesses and many of these establishments go bankrupt during the first six months of operation. III. Characteristics of Small Business Owners Running a small business is challenging and it takes a special breed of entrepreneurs to set-up and run this kind of establishment. According to Zahra et al. (2009), running a small business is like running a guerilla army with limited resources in a flexible environment that allows the entrepreneur to innovate and be creative. As earlier mentioned in this essay, there are many desirable characteristics of small business owners. In order to survive in a very competitive market, small business owners must know how to spot opportunities and act on these opportunities quickly and efficiently. For instance, when a small business owner sees a new community arcade being built near his or her establishment, he or she will immediately seize the opportunity to market his or her products and services to the owners and would be occupants of the arcade. Also, good business owners know how to set specific, measurable, achievable, realistic and time-bounded (SMART) goals ((Deakins, and Freel, 2009). By setting SMART goals, small business owners can maximize the use of their limited resources and minimize risks. Aside from being able to spot opportunities quickly, small business owners must know how to generate the right kind of information to conduct a thorough analysis of the risk involved in the business. Taking risks is very important in any business endeavors and for small business owners to survive the fierce market competition; they need to take calculated risks by factoring in the facilitating and hindering factors in achieving their goals (Deakins, and Freel, 2009). Note that taking risk is one thing and taking calculated risk is another thing so business owners should not confuse these two. Doing business should not be based on blind faith and calculated risk taking is very important to minimize business losses. Doing a strength, weaknesses, opportunities and treats (SWOT) analysis before getting into a new endeavor is very important to assess the capabilities of the business (Deakins, and Freel, 2009). Also, this kind of analysis will expose the vulnerabilities of the business and help find the business-owners ways to strengthen their organizations. Also, by conducting a SWOT analysis, the small business owners can determine the amount of risks that it can handle in a given period of time and in a given situation. By analyzing the different factors affect the business, small business owners can gauge their chances of success and formulate informed decisions whether to take on an opportunity or not. Small business owners usually operate on a learn management system where they get to take on several roles at the same time (Deakins, and Freel, 2009). As it is, small business owners must be wholeheartedly commitment to their business. Commitment is very important in this case because in a small business structure, almost everything depend on the owners. If the owners do not have initiative and they are not committed to make their businesses grow, then they are bound to fail especially during the start-up stages of the business. Aside from committing themselves to their businesses, small business owners must know how to elicit the full commitment of their employees in order to bring their businesses to the next level. Note that small businesses operate with just a few employees and if these people do not do their work well, their poor performances can greatly affect the productivity levels of the business. For instance, if the shoe designer of the small shoe factory does not come up with good designs, the factory can lose some of its valued clients. Getting the commitment of the workers depend on the ability of the business owner to communicate their ideas and aspirations to their employees. As it is, small business owners need to be good communicators and should be able to translate their ideas into workable and persuasive solutions to problems. Knowing how to inspire creativity is a very important communicate trait that small business owners must develop. No, the business owner does not have to be an eloquent speaker to convince others but what is important is that he or she can communicate his or her ideas effectively to inspire creativity. Aside from inspiring creativity, the business owner must know how to involve the employees into the business to give them a sense of ownership over their work. Once the employees understand the value of their work, they will be more inclined to work for the benefit of the business. Note that business owners will eventually have to delegate their work to their employees and if the employees are not loyal to the business, they may not have the best interest of the company at heart. If that business owner does not have loyal employees, it can effectively delegate his or her functions. Knowing how to plan and monitor the activities of the business is another important characteristic that every business owner must have (English and Moate, 2009). Planning is very important in all aspects of the business starting from day one when they entrepreneur decides to set up the business. Without proper planning, the business will not have clear directions and it is bound to lose resources. Having good plans is not enough to keep the business running so small business owners must have good monitoring skills as well. Knowing how to install business monitoring and control measures is very crucial to keep the business in the right direction (English and Moate, 2009). Monitoring and control should not be limited in the production area but must include all the aspects of the business including human resource management, financial management, marketing management and others. The confidence level of the small business owner is a crucial factor to his or her success. According to Deakins, and Freel (2009), confident is one of the most important traits of small business owners. To build confidence, the small business owner must know the different aspects of his or her trade through research and continuing education. A true entrepreneur must always have a thirst for knowledge and since knowledge is ever expanding, small business owners should not stop learning more about their businesses. References Deakins, D.; Freel, M. (2009). Entrepreneurship and small firms, 5th Edition. McGraw Hill. English,J., (2006), How to organise and operate a small business in Australia, Allen and Unwin, Australia. English,J., and Moate,B., (2009) Discovering new business opportunities, Allen and Unwin, Australia. Gerber,M., (2001), The E-myth revisited: Why most small firms don’t work and what to do about it, Harper Collins, New York, NY. Zahra, Gedajlovic, Neubaum, Shulman (2009). A typology of social entrepreneurs: Motives,search processes and ethical challenges, Journal of Business Venturing, 24 (5), pp. 519–532 Read More