SMALL BUSINESS ENTERPRISE: PROBLEMS AND ADVANTAGES
SMALL BUSINESS ENTERPRISE: PROBLEMS AND ADVANTAGES
SMALL BUSINESS ENTERPRISE: PROBLEMS AND ADVANTAGES
Small is beautiful and manageable. And yet small can be quite a big trouble. The establishment of a small enterprise can thus be quite profitable and enhance expansion into a big successful business organization.
It can also be a means for bankruptcy and loosing name. It all depends on how one has perceived, planned for and operated the small business organization.
This material will try to analyze the associated problems of, and advantages of small business organization. It is intended to encourage intending entrepreneurs Nigerians-Nigerians in particular to have a clear perception of how best to conceive ideas towards starting the small business organization; a gateway for them to become millionaires''. The writer has the privilege to have associated with both successful and unsuccessful small businesses.
A new small business well conceived and well planned possesses certain inherent competitive advantages. It is normally accepted by the local community and the owner is greatly admired and respected.
The local community accepts the success of such a business as essentially the achievement of the community as the whole community is projected with a good by such an establishment.
The business is thus able to get local patronage. Such conception is normally from clear perception of the local community and thus producing a product that can be demanded. The personality of the owner and particularly his social standing is an important factor for the success of the small business.
Thus a cheerful and friendly person can certainly succeed whereas an unfriendly and reserved person is most likely to find a hostile market.
Now let us start being specific. Supposing one decides to set-up a small bakery business in sokoto town. Such a business project has not got good chances for success in sokoto as at now. One, he cannot likely acquire the modern bakery equipment since they are not available. Thus, he will end up setting a bakery with local oven. The bread to be produced will not be as good as that produced in modern bakeries few of which are in sokoto and are greatly patronized. Also, our new bakery will encounter problem with respect of raw materials. The Nigerian Flower Mills Limited, the main supplier of flour in the town, has its established dealers among which are established owners of modern bakeries.
But, supposing such a bakery is planned to be established in such place as Binji, which is a rural area and has not got any established bakery, there, the local oven bakery will find ready market for its bread. It will be uneconomical for people to prefer coming to sokoto to buy bread when there is a bakery in their place. The people in such a place do not care much for differential taste. The local community will in fact be proud of the establishment of such a bakery and buy the bread. The neighbouring villages will also be coming for the bread.
A second proposal is on the establishment of a Cold-Store. An entrepreneur can decide to establish a Cold-Store business in an urban town like Sokoto or Gusua (in Zamfara state). He can acquire a refrigerated vehicle for the transportation of fish from places like Yauri and storing them. The vehicle can be used for commuting around, the products of the Cold-Store. The Cold-Store can have a wide range of products from fish, meat and even drinks. The business is highly profitable, though, it requires full attention of the owner- No business doesn't anyway.
The common problems related to smallness:
Highly personal character of business
Financial problems
Time pressures
The highly personal character of business makes business to typically stand or fall on the experience, intelligence and initiative of one man. Thus, the business becomes just a mere extension of an individual's personal activities, and its business decisions-particularly financial may be strongly influenced by purely personal considerations. Thus, if the business is owned by a man of drive, initiative, and prudence, there is no reason why it cannot succeed. The capital of the business is, in most cases from personal savings. The bank loans are difficult to be raised at the initial stage. This is difficult because the business has no immediate past records to guide for projections. A small business is normally owned by one man and he perform all managerial functions alone.
The pressure on such performance may become too much and unless o is very much careful, can make a silly mistake that may ruin the business. His members of family ill realize that he has little time for them and so also his friends.
He thus must explain his situation to them and gain their sympathy if he wants their cooperation. He is also to expect keen competition from those similar businesses in the market. The will make efforts to see that this business becomes the leader.
Let's now consider the situation where our new small business has been established and is achieving success. However, can the business expand and reduce most of the problems associated with the small business?
The most common problem associated with such business is that of working capital management. A new small business is frequently involved with new and inexperienced management.
here are errors in projecting needs; particularly in calculation of absorption funds into working capital, especially as production and sales develop. Managerial incompetence is considered to be the primary cause of failure among new and small businesses.
The business may have disadvantages in dealing with suppliers of capital, e.g. for those suppliers who are motivated by purely business considerations. The principal guide for future performance is again on the record of the immediate past. Without operating statements, balance sheets, and credit and other records which lend some degree of objectivity to a judgment of future projects, the prospective creditor or shareholder lacks a firm basis for the assumption of the very considerable risks involved.
The inevitable result is the many sources particularly institutional sources; refuse to assume these risks on protective provisions such that the extent of their participation is seriously limited.
A loan which is only a fraction of the value inventory or accounts receivable will not solve the working capital problem of the business.
However, the business may well be lucky for trade credit from suppliers. Suppliers wish to develop new customers and tolerant to new businesses provided Management give evidence of good faith in its dealings e.g. openness about financial difficulties in discussion with suppliers usually yields better results than secretiveness.
Also, a management which has satisfactory records of performance in other business situations helps a new business in no small measure. Confidence inspired individuals in a management, must of course, be supported by early indications of strength in the new venture.
The owner's ability to analyze a problem and finding effective solution is an important factor. His personality and relationship with his business associates helps in the success of his venture
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