Characteristics of Small Business Owners and Nature of Small Businesses - Coursework Example

Characteristics of Small Business Owners and Nature of Small Businesses Introduction A small business is a business enterprise which is independently owned and managed, controlled in a personalized way and which has a small market share i.e., not dominant in its field. Though various definitions of a small business have been advanced, this definition is preferable as it presents a qualitative criterion to separate them from large businesses using their distinct nature. Further, the uniqueness of small businesses is heightened by the distinctive characteristics of small business owners (Bannock, 2005). Most small business owners portray distinct characteristics in their approaches to management of their businesses, their relationships with other people and in the way they make decisions in all undertakings of their lives. In addition, most of them display similarities in the levels of skills and knowledge they posses in respect to management of their businesses. Most small businesses are unique in nature given the way in which they are managed. This arises from the fact that they are usually managed by independent persons who are entitled to make all decisions. Also, they are distinct in the percentage of share they have in their markets in various aspects depending on attributes used for measurement. Generally, they have fewer complexities to invest in compared with large businesses. This partly explains the distribution patterns and ownership of such businesses as most of them are found in rural areas and are owned by people with low incomes. Against the background information above, this paper discusses the features of small business owners and the nature of small businesses. Characteristics of small business owners To start with, small business owners are systematic hard workers. This fact has been portrayed in a research by Jeffrey, Hide and Legg (2010) whose purpose was to determine the preferable learning styles and approaches of small business owners so as to identify some of the principles which could be used to train them to meet required skills. This study involved that involved a sample size of 102. From their findings, more than 73.7% of small business managers were found to be very high on this profile and a further 18.9% were moderate. This profile was made of three characteristics, i.e., focus on goal, effort and sequence of learning, as Jeffrey, Hide and Legg (2010) explained. In that scenario, most of the respondents indicated that they did put a lot of effort into their work. In addition, they classified themselves as sequential learners – i.e. able to learn through logical steps. In reference to identification, level of attention, initiative and persistence, a high number possessed these attributes. In short, the findings of this research indicate that small business owners are high on hardworking profile. According to Burke (2011), most small business owners are competent in human relations, i.e. they are emotionally stable and have good interpersonal relations and good communication skills. They have preference to work in teams and enjoy sharing their experiences and background. They also like to listen to suggestions and solutions offered by others in groups as well as learn from them. This can be confirmed by a research carried out in Hungary aimed at understanding how knowledge management impacts on small businesses to create a framework of best practice in these businesses (Burke, 2011). The approach taken was examination of the barriers to sharing information in such kinds of business. The results indicated that in areas where small businesses were successful, there was enthusiasm and commitment to knowledge sharing. A key characteristic of small business owners is that they are risk takers. Usually, the owners of small businesses do not have complete information to enable them make decisions. Evidence shows however that most successful small business owners do take calculated risks. But as Chiste (1996) indicates, they do not fear failure but use it as a source of their motivation. In addition Chiste (1996) indicates that most small business owners have a feeling of need for independence. They have a craving appetite for freedom and power over situations. Additionally, small business owners are strategic planners. Most of them tend to be good at setting business objectives and developing various ways of achieving them. They usually adopt changes easily and understand their industry well. Okpara (2011) notes that most small businesses lack experience in management expertise. Most of them are generalists who lack the support of skilled professional staff in areas such as marketing and research, financial analysis, advertisement and other areas. Okpara (2011) conducted a research aimed at investigating the factors that hinder growth and survival of small businesses in Nigeria. A survey method was used to gather data from 211 small business owners in different locations. Findings of the research indicated that more than 62% of the respondents lacked adequate training and skills to operate these businesses. In addition, most of them were found not to have technical knowledge in the physical process of production of goods and services. Nature of small businesses Small businesses are usually managed in a personalized way. This is because the managers are the owners who are usually present most of the time and make a living out of the business. This makes them to display personality of the owner, especially when he/she is present most of the time to manage it. According to Gottfridsson (2010), the independence of such businesses brings a close relationship between management and capital since the manager is also the owner. Thus, any decision made by the owner has direct implications to his/her money. Moreover, the owner is able to understand the needs of customers and establish a close relationship with them and in particular, have an understanding of their perception regarding the business products. This helps the owner to react with speed to competitive opportunities and threats, commit to quality and provide a high level of services to the customers (Lindstrand & Lindbergh, 2010). According to Longenecker et al, (2006), small businesses have a small market share in their field. This means that they are not dominant in their markets. The measure of size can be in terms of sales volume, number of employees, number of potential customers or other significant comparisons. Small businesses have a small percentage of revenue and number of potential customers compared to the biggest businesses in the same field. They too employ few persons and even in most cases, they are managed and controlled by one person. But the issue is that they generally have little influence on their market compared with the biggest units in the field. Further, as Cheste (1996) illustrates, small businesses do not require a lot of resources to invest in them. They can easily be funded from personal savings, business grants, financial aid and donations from other people among other sources. In short, such a business has relatively fewer complexities to run. Most small business enterprises are found in rural areas. As Perren, (1999) explains, most small businesses are owned by persons with low incomes usually located in areas of high employment rate. In addition, such businesses are likely to have strong economic ties to the immediate community, both economically and socially. For example, an analysis carried out in Tanzania indicated that out of approximately 2.7 million small business enterprises employing less than 5 people, 60% are located in rural areas, operating from homes or roadsides. They create employment in the rural areas, utilize local resources and are largely labour intensive (Olomi, not dated). Finally, most small businesses lack incorporation. Incorporation brings about protection of limited liability and sometimes tax advantages albeit with requirements of more transparency, legal formalities and paperwork. This means that if the firm goes into receivership, the owner is liable to transfer other personal properties in payment of existing business debts. This is because most of the small business owners do not have legal knowledge concerning incorporation. In addition, some players do not perceive the relevance for incorporation. Consequently, it is difficult for them to attract funding from investors or from banks. Conclusion In conclusion, this discussion has clearly examined some of the distinct characteristics portrayed by most small business owners. They have been portrayed as systematic hard workers, with abilities to learn in a sequential manner, focus on their goals and put a lot of efforts in management of their businesses. They are emotionally stable, have good communication skills and good at interpersonal relations. In short, they are competent in human relations. In addition, small business owners are risk takers, even though they make their investments on calculated risks. Apart from that, such persons feel the need to be independent, which drives them to make their own investments other than be employed. However, most small business owners lack management expertise. They thus depend on rudimental knowledge in management of their businesses. The nature of small businesses in general has been examined to a large extent in this paper. Most small businesses reflect the behaviours of their owners. This arises due to the close relationship that exists between the owners and the businesses. Small businesses also have a small market shares in terms of volume of sales targeted, number of employees and number of potential customers they attract among other measures compared to other larger businesses in their fields. They also operate on a relatively low budget and thus require little recourse to invest in. Most small businesses are located in rural areas and offer employment opportunities to the low income in those areas. Finally, small businesses have unlimited liability and this fact makes it difficult for them to attract funding from investors and financial institutions to boost their operations as large businesses do. References Bannock, G. (2005). The Economics and Management of Small Business: An International Perspective. New York: Routledge. Bridge, S., Cromie S. & Neil, K. O. (2003). Understanding Enterprise, Entrepreneurship, and Small Business. New York: Palgrave Macmillan Publisher. Burke, M.E. (2011). “Knowledge sharing in emerging economics.” Library Review, 60(1): p 10. Chiste, K. B., (1996), Aboriginal Small Business and Entrepreneurship in Canada, Captus Press, Ontario, Canada. Gottfridsson, P. (2010). “Development of personalised services in small business: An interactive learning process.” Managing Service Quality, 4: 388-394. Jeffrey, L. M, Hide, S. & Legg, S. (2010). “Learning characteristics of small business managers: Principles for training.” Journal of Workplace Learning. 22 (3): 7-11. Lindstrand, A. & Lindbergh, J. (2010), “SMEs dependency on banks during international expansion”, International Journal of Bank Marketing, 29 (1): 77-79. Longenecker, J. G., Moore, C. W., Palich, L. E., & Petty J. W. (2006). Small Business Management: An Entrepreneurial Emphasis. Ohio: Cengage Learning. Okpara, J. O. (2011). “Factors constraining the growth and survival of SMEs in Nigeria: Implications for poverty alleviation.” Management Research Review. 34(2): 166-171. Olomi, D. R., (not dated). Working paper for presentation to the high level commission on the legal empowerment of the poor, unleashing entrepreneurial potentials of the poor in Tanzania: prospects, challenges and way forward, University of Dar es Salaam entrepreneurship centre, of Dar Es Salaam, Tanzania. Perren, L. (1999). “Factors in the growth of microenterprises (part 1) developing a framework.” Journal of Small Business and Enterprise Development, 6 (4): 38-42. Read More