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Small Business And Its Unique Characteristics

30/04/2018 12:20:53

Dilim Odumah

Small business has been described in different ways by scholars to give a unique meaning, especially as it relates to the local community they serve.
An individual is said to be into a small business, if the person is able to acquire a small store and offer services or retail operations. Services rendered in small businesses, are therefore, in varying degrees.

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A Typical Small Business Store In Local Environment

However, before digressing a little further, let`s actually look at what small business is - that makes many get involve in it.

A small business is therefore, an independently owned and operated company that is limited in both size and revenue depending on the industry.

This definition has clearly explained lucidly why most people are engaged in small businesses, especially with particular reference to limitations in size and revenue at commencement.

In many countries today, small businesses have assumed a significant proportion of services or retail operations. Today, you can easily find small stores, bakeries, hairdressers etc that offer distinct services.

In the area of trade, one can conveniently locate people in carpentry works, electricians, restaurants, guest houses, photographers; as well as in very small-scale manufacturing, and Internet-based businesses such as web design. 

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The other professional small business operators include: lawyers, accountants, dentists and medical doctors. Albeit services offered by these professionals can also be extended, if they decide to work for large organizations.

Since small businesses have no requirements as to the point of entry, size or the amount of initial capital etc, there is no questions as to why it has gained popularity in many countries toady (and will continue even in the future).

          Unique Characteristics Of Small Business

Small businesses have the tendency to prosper and grow to the size of large company which leverages government support. It is usually the mission of small business concerns.

While this is the overall intention, there are, however, some small business concerns that are potentially suited to operate for a long period as such; just to serve their local community and generate sufficient income for the entrepreneur.

However, aside growth, expansion and government support, there`re some unique and distinguishing characteristics that actually set small businesses apart from the larger companies.

These include the following:

1. Engagement of Employees

The fact that there is not much to do by the small business concerns, is the more reason why they engage few employees.

While the small business accounts for the number of hands needed, but whatever it is, cannot be compared to that of larger corporations.

In most small businesses, you discover that they`re run entirely by single individuals or a small number of family members.

This is, however, not applicable to larger business which cannot make do with engaging fewer employees, irrespective of the particular venture that they operate.


2. Revenue And Profitability

The fact that small business operates in a lower scale, largely explains why they generate lower revenue and profit when compared to their larger competitors. 

Of course, there is no magic wand that will make the small business generate more profit, when it has only made an insignificant amount of investment.


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Hence the amount of capital at their disposal, to some extent, affects the level of investment; which in turn determines the profitabilty. This is one of the main reason why small business aspires to grow.

Though lower revenue does not imply lower profitability. As most of well established and managed small businesses acquire their own facilities and equipment, which in turn help them to keep costs lower and make more profit than expected.


3.  Smaller Locations

Due, mainly to the nature of services offered by small businesses, they are often located only in a limited area of operation.

Consequently, these companies are not likely to have sales outlets found in different locations. A typical example of this scenario, is a large number of small businesses operating from a single office or service outlet.

For the fact that it is possible, and more advantageous to run a small business at home, without any company facilities; and incurring accommodation costs - many entrepreneurs have embraced it the more.


4.  Ownership and Taxes

The nature of small business does not allow it change its form at will, as they are more suited for small-scale operations. In addition, to change its corporate form, requires some legal documentations.

In most cease, instead, small business concerns prefer to organize as sole proprietorships or partnership or limited liability companies with little documentations.

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Pharmaceutical Store of a Small Business Concern

These forms of companies, however, provide the greatest degree of managerial control for company owners, while minimizing the problem and expense of business registration.

These businesses, on the other hand,  generally do not file their taxes; rather, owner- managers report business income and expenses on their personal tax returns for assessment. Great opportunity for manipulation! Can that be wrong?

5. Small Market Coverage

The small businesses usually cover a much smaller area. Due to the scale of operation of these small businesses, they tend to focus their efforts solely on local environment.

They operate and serve mainly single communities, within their area of operations, as in the case of operating a convenience store.

By virtue of the nature of small business and its unique characteristics, they cannot extend the areas of coverage to larger areas, as that presumably would  increase the scale of operations; as well as push up the costs of doing business generally.