Meaning of Small Business

Small business is an organization. It is engaged in production and marketing. The various types of activities can be: manufacturing, services, construction, transport and trade. It is everywhere.

The small business owner establishes and manages the business to attain personal objectives. The business is an extension of the owner’s needs, objectives and personality. The business growth is not a primary objective. The aim is to continue operations over a long period of time. The major characteristics of a small business are:

a.       Management is independent: Managers are owners. One or a few persons make all the critical management decisions. They are free from outside control.

b.      Closely held ownership: One or a few individuals supply the capital. Ownership is held by them.

c.       Local operations: Operations are locally based. It has a relatively small share of its market. It is located near the market. But market need not be locally based.

d.      Small size: Its size is small. Smallness is relative to the size of large firms in the industry. The measure for small size can be one or combination of

-          number of employees

-          total fixed assets

-          annual sales volume

-          capital investment

The definition of small size varies between different forms of activities, such as manufacturing and non-manufacturing etc. It also varies between small countries.

The number of employee’s yardstick is transparent, comparable and easily available.

Defining small business is difficult. A number of definition exists for small business.