|
|
 |
 |
 |
| Wednesday, 24 March 2004 |
 |
|
 |
Business | |
| News Business Features Editorial Security Politics World Letters Sports Obituaries
|
Entrepreneurs: the core of small business by Chris De Fonseka Small businesses are vital to the economy of any country and forms the backbone of the private enterprise system. Apart from the many services they provide to consumers, small businesses also help large businesses to function effectively. Many suppliers to large organisations are small firms run by entrepreneurs, providing quality products or services in very profitable but competitive markets. Who is an entrepreneur? Entrepreneurship begins with the recognition of an opportunity, a demand that needs to be filled. An entrepreneur is a person who, not only sees an opportunity but is also willing to take the risks and make the supreme effort to make it happen. They are people who have a high level of confidence, believe in themselves and their own ability to achieve pre-set goals. They tend to be independent, with a tremendous amount of energy and always driven to achieve their goals, irrespective of the challenges of long hours of hard work and possible initial failure. Entrepreneurs, after diligent research and effort start their own businesses in a small way, initially. What is a small business? In general - sales, number of employees, assets, net worth, market share and so on may be used to decide the status of a business. However, a small business may be simply defined as one having individual management, with the manager often owning the firm, the capital coming from one individual or a limited number of individuals and a firm providing products or services as a small part of an existing business. What are popular areas of small business? Small businesses are found in nearly every industry or business sectors. Retailing and service firms are very popular and common small businesses that can grow rapidly are manufacturing and high-tech products. Franchises also provide the small business person with high potential for a lucrative venture. Any area where there is a demand and a need will form an ideal platform from which to launch a small business and this can be in a conventional or unconventional area. The main areas of popular small businesses can be broadly divided into - Retailing and Wholesaling Financial Services Manufacturing and Construction Franchises High-Tech Products Communication, Transport and Trade. The small business retailer far outnumber the retail giants and in recent years has provided the highest number of employment. Some of the popular retailing enterprises are - jewellery, flowers, foods, drugs, clothing footwear, leather goods, plastics and rubber products and the list is endless, with the accent on any item that an ever increasing population needs. Manufacturing This is a sector where a vast expanding market exists. However, to achieve the huge profits available, one has to put in a lot of hard work and requires skill, especially since this market is highly competitive. One could manufacture his own product, try new and innovative ones or be a supplier for larger manufacturers, who outsource their jobs for lower costs and a quicker turnaround. This area of operation will require technical knowledge, skilled workmen and in most cases, large capital investments. Franchising The concept of franchising has played a major role in the growth of small business. Franchising is a legal contract between a dealer and a manufacturer or a supplier, setting the methods and standards to be used in marketing products or services. The dealer or the franchisee is a small business person who is contracted to sell a product or service of a supplier- the franchiser - in exchange for some payment, usually a flat fee up front, plus possible future royalties or commissions. High-tech businesses Small scale businesses dealing with high-tech products as part of a larger industry has very high potential. Those striving to produce and market some scientific innovation or improve on an existing one may find a drawback in needing a large initial capital outlay, which is due to the long time lag between start-up and final sales revenue. Services Small businesses offering services such as - cleaning, secretarial, dentistry, doctors, auto-repair shops, restaurants, funeral homes accounting and so on forms a vibrant and very successful small business sector. When you consider that over forty percent of all persons employed in the small sector are in the services category, an entrepreneur would do well to consider services as one of the best options. Communication, Transport and Trade A sector which has tremendous and unlimited business possibilities. This area will need a thorough knowledge and good business sense. Since a fairly large capital would be needed, an entrepreneur may consider raising the required capital through a bank or a number of private lenders, which means a detailed and sound business plan would be needed. May even have to consider a partnership. Leasing, lines of credit, overdraft facilities and other credit facilities are some of the options available to a small business person in this category. Advantages of a small business Small businesses are not simply smaller versions of larger businesses. They are small but legally formed organisations, each having its own style of management. Through innovation, adaptability, lower costs, better quality and having the ability to recognise and fill the niches of isolated markets, big or small, they have a distinct advantage. Small firms are often the ones to offer new concepts and new products in the marketplace. Due to their lower overhead costs, they can invariably offer a product or service cheaper than a larger firm and also provide better quality, in most cases. When they adopt the -JIT- system, just in time supply system, with a quick turnaround, the larger firms would prefer to outsource their urgent jobs to them. Small businesses often can also count on the services of unpaid labour. Entrepreneurs themselves usually work long hours and their families most often chip in to help which contributes towards lesser costs. Disadvantages of a small business Although starting a small business is both challenging and rewarding, an entrepreneur has to look into its negative side also. At the beginning, a variety of difficulties face the small business person, such as - inadequate funds, government regulations, poor management, the need to ensure good quality, to be competitive cost wise and most important - getting an adequate share of the market. While finding reliable and skilled workmen or staff, liquidity and lack of technical support may pose problems, business recognition and entering the marketplace, may take a lot of skill and patience. In conclusion, the important parameters a would-be entrepreneur should look at are projections such as - profit and loss statements, ratio analysis, liquidity ratios, current ratio, acid-test ratio, profitability ratios, break-even point, ratio on sales, return on equity, activity ratio, inventory turnover ratio, debt ratio, debt to owner equity ratio and cash payback period. These data compiled from projections and compared to business standards would give a sound idea of the feasibility of the proposed project. The entrepreneur could then decide whether to go ahead, modify the project or select a completely new one. |
|
News | Business | Features
| Editorial | Security
Produced by Lake House |
