Small Business Congress 2011

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Small Business Congress 2010

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What is truly called small business?

Small Business means that something involves a small number of employees. But the definition of “small” varies from country to country. In U.S.A small businesses are considered as those, which are having less than 100 employees whereas in European Union it is less than 50 employees.

But other than this method of classifying small business, there are also other methods such as annual sales or turnover, assets value or net profit. We can also go by a mixed definition that is we can consider headcount, turnover and net profit altogether. In general, we can say, a small business means a business, which is owned and operated independently, that is operations and decision-making are under the total control of owners; equity is not traded publicly and financing is done by the owners and the number of employees is small. The picture will be vivid if we look at the nature and characteristics of small-business, which are as follows:

• Business operations and decision making rests in the hands of one or two persons who are owners or partners.
• Business equity is not traded publicly.
• Ownership and management are not separate in general.
• Formal contracts are kept at a minimum level.
• Personal security of owners is very important for secure business debt.

Opportunity is something very important because it is the major job provider in the most of the countries. It can be started with a low level of capital and can be operated on a part time basis. Small business operators tend to share a close relation with their clients and customers and therefore they can achieve greater accountability and responsiveness. These opportunities can be used in various forms.

Small Business can be a privately owned corporation, can be a partnership, sole proprietorship, or franchising. Partnerships are better as business opportunity compared to privately owned corporations for taxation purposes. Because in a partnership firm dividend tax is eliminated which is levied on realized profits of an ownership corporation.

Sole proprietorship also has great business opportunity which small business desperately requires. Whereas identical small business operating as a privately owned corporation or partnership submit a lengthy tax return which consists of quite a few pages and also presents quarterly and annual payroll tax returns, a sole proprietorship enjoys a lot of liberty from government regulations. Among every form of business ownerships sole proprietorship suffers from least number of government regulations.

Franchising is also a very good small business opportunity as by franchising the owners can reap the benefit of economies of scale of the big corporation (franchisor). Through franchising the owners get to use a strong brand name and at the same time they can continue having an affordable level of investment.

Small business enterprises and sole proprietors require business support system which are easily understandable and can cater to the needs of their small businesses in order to be competent and to utilize the new business opportunities properly.

When to negotiate a small business deal?

We would like to share few tips for small, home and micro business owners regarding negotiation of small business deal.
Before embarking on any negotiation, you need to be highly prepared to comprehend your client.  There is a nice word “Blind Will” mostly used in business negotiation.  If you have ‘blind’ will, it will automatically help you give the upper hand to the other party.
You need to be very clear about your own motivations for entering business negotiation and also try to understand what the other party will be looking to gain from your service.
You should never give away or concede anything without getting something back from the other party in return. Evaluation skill is important at every stage of the negotiation. At every stage you need to weigh up whether a deal is even possible. While dealing, you make sure that the persons have enough authority to complete the deal, otherwise it is wastage of your valuable time. And ultimately you have to back out.
When it comes time to close the deal, make absolutely certain that all parties agree on the terms. The consequences of any deal are likely to last for some period of time (perhaps permanently) so it is essential that there are no misunderstandings or ill feelings.

Know about the consumer behavior and shopping decision before starting your small business

Before making your small business marketing strategy, you should know about consumer behavior and their marketing decision. The consumers think, feel, reason, and select between different alternatives such as brands, products, and retailers, before purchasing the products or services. And there is also a psychology of how the consumer is influenced by his or her environment (e.g., culture, family, signs, and media. This defines that how consumer motivation and decision strategies differ between products that differ in their level of importance or interest that they entail for the consumer, how marketers can adapt and improve their marketing campaigns and marketing strategies to more effectively reach the consumer.

A few trends that impact the market these days:

• ·        How rapid the product (or service) is going to be
• ·        What is the likely impact on consumption and its growth / trends?
• ·        Changing family structure and its future trend
• ·        Demographic changes of consumers in coming years
• ·        How is it going to impact shopping behaviors?
• ·        How is it going to impact the spending power and hence consumption?

It is true that spending habits varies on different sections of society and different demographic areas. But it is changing due to their growing disposable income, relative increase in the younger population and the change in attitude towards shopping.

In urban areas, rapid advances witnessed by India in areas like education, communication, information technology, transportation and retail gave created a sense of freedom in the minds of people. These advances have led to a paradigm shift in the way Indian consumers behave today. Consumers are seeking convenience at their doorstep for regular purchases, but are willing to travel to exclusive destinations for valuable items. With Indian consumers maturing to self-service formats, reliance on salesmen is on the decline.

But in case of rural market, rural consumers are fundamentally very different from urban consumers. A majority of them are farmers and naturally, the rural spending basket differs from urban spending, as it not only consists of personal and household items but also occupational expenditure like fertilizers, seeds, pesticides and so on. 

Consumer facing companies in sectors like goods, financial products, healthcare, consumer durables, personal care, household products and apparels need to be aware of such discontinuities taking place in their consumer base. It would be imperative for them to revisit their strategies to avoid being caught off guard.

Small businesses help in preparing for a more consumerist society

According to a study by the Mckinsey Global Institute, each consumer in India will spend over Rs. 200 a day, on an average, by the year 2025, steered by a ten-fold increase in the country’s middle class population and a three-fold jump in house income during this period. The aggregate consumer spending could more than quadruple to Rs. 70 trillion by 2025, from about Rs. 17 trillion in 2005. So it is understandable that Consumerism is likely to dominate the Indian market in the next few years.

India’s rapid economic growth has set the stage for fundamental change among the country’s consumers. The same energy that has lifted hundreds of millions of Indians out of desperate poverty is creating a massive middle class centred in the cities. Twenty years ago, urban India’s lifestyles and buying trends were a far cry from what we see today.

With limited choices, consumers purchased commodities from the few brands available. In 1991 India threw her doors open to international trade, and the situation changed dramatically and so did consumerism in India. Today, consumers are spoilt for choice and fully acknowledge that they rule the market. Manufacturers cater to their whims and give the consumer complete control of market trends. Despite India having a low per capita income, it still remains a lucrative market, even for costly products.

One of the key reasons is that small businesses are playing a major role to help in preparing a consumerist society for India’s large population. Small business makes India a consumption-led economy based country where public spending per Gross Capital formation is 40% while private consumption is 60%; among them, retail consumption is 62% whereas nonretail consumption is 38%.

If India’s small business can continue its recent growth, Indian consumer tends to associate himself with products that communicate the message of family values, traditions, care and affection.

Let us tell you activity wise what do small businesses serve at all?

Small Businesses are spread throughout the country and are economically significant in every region, although the balance of large and small businesses varies from region to region. These kinds of business form a very significant component of the Indian economy, in terms of employment to the Exchequer, and the role they play in the social and enterprise infrastructure.

But the question is what kind of services exactly they perform to carry out the economy of the countries like India?

·         Trading and repair services:  This is one of the predominant service activities in the country and consists of 13.95 Million enterprises, constituting over 61 per cent of the total service enterprises.

·         Hotels and restaurants: There are about 1.43 Million enterprises engaged in this activity.

·         Transport, storage and communication: There are about 3.18 Million enterprises engaged in this activity.

·         Financial intermediation: Around 0.14 Million enterprises fall under this activity.

·         Real estate, renting and business activities: 0.61 Million enterprises are engaged in this activities and a significant proportion fall under the category of micro, small and medium enterprises.

·         Education: Education services include 0.46 Million institutions who are engaged in research and development, teaching and training service.  

·         Health and social work: There are about 0.64 million entrepreneurs engaged in this activity.

·         Other Community, social and personal service: There are about 2.32 million enterprises engaged in this activity.