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2. Aims and objectives of session Seven Describe the importance of the small business sector in a national and international context; Construct a definition of what is meant by a small business; Explore some of the issues faced by family businesses; Examine how small businesses may arise and the vital role played by entrepreneurial behaviour Introduce the types of help that are provided to encourage and sustain the small business. 2

3. Benefits of small businesses SME sector plays a major role in creating employment, and new jobs impact on business activity through increasing spending power. SMEs can offer specialized services to customers that larger businesses may not regard as cost effective to provide. SMEs often work as subcontractors on big projects being managed by larger companies. SMEs are likely to have specialized knowledge of the local business environment and can tailor their products and services appropriately. SMEs contribute to the local infrastructure through assisting in regional and local growth. Smaller businesses maybe able to innovate in ways that larger ones would find difficult. They tend to be less bureaucratic and more flexible in their response to customer demands. 3

4. Where do small businesses come From? Starting points for a small business Starting points for a small business include the following: The individual who comes up with an idea for a product or service for which he/she believes there is a market. The individual who is made redundant from his/her job and who decides to use this opportunity to try self-employment ‘push factor’. The individual whose personality makes it difficult for him/her to work for someone else. He/she does not like to be given orders and the bureaucratic hierarchy of big business can’t contain his/her needs for independence ‘pull factor’. Management buy-out, starting on a small scale, leading to the creation of a new small business. This might arise because the owners decide to sell a part of an existing business. 4

5. Where do small businesses come From? (Cont’d) Motives for starting up an SME Motives for starting up a small business could be: An individual’s prior experience: strong interests or hobbies and/or work experience; Being a member of a minority ethnic group: a small business can be a way of entering mainstream society on one’s own terms and breaking through barriers to employment; Level of education: self employment maybe the way forward for those who left formal education at the earliest opportunity, or for very well educated people with particular skills or knowledge; Exposure to role models: in many cases the entrepreneur has come from a family where entrepreneurial activity is present. 5

6. The risks involved There is no guarantee that your product or service will capture a share in the marketplace; Market share has to be won in a competitive business environment. You need to find the start-up capital, sometimes you may need to borrow (If things go wrong with the business, there will be a way of repaying the loan by the sale of assets). There might be a lack of knowledge about the opportunities and support for entering self-employment. A lack of role models within the society and/or within the family of those who have set up their own businesses. 6

7. Entrepreneurship Entrepreneurship is the activity of entrepreneurs, people who create new products, processes, services, and markets. Entrepreneurs often develop new ways of working and doing business. Key motivational aspects for potential entrepreneurs include: more freedom, more money be my own boss, gain more respect lead and motivate others implement an idea or innovation dissatisfied with job need a job more of challenge family tradition being the forefront of technology been made redundant 7

8. Entrepreneurship (Cont’d) McClelland suggested that an entrepreneurial individual has: a high need for achievement, a drive to excel. This is often reflected in strong commitment to a work ethic, where the individual is prepared to work the long hours often necessary in starting and running a business in its early days. the tendency to be a risk-taker. the ability to cope with and tolerate ambiguous situations, where decisions have to be made but information may not be complete. the need for personal autonomy: they want to be in charge of the business. a high internal locus of control. In other words, they have a high belief in themselves, believing that they are in control of their destiny. an ability to be open to and spot opportunities as they arise. Entrepreneurs are said to be opportunistic. In this sense, they may be outward-looking and creative in non-conventional ways. They may have an approach that would challenge acceptable norms of business behavior. 8

9. Support for small business start-Up The government can support small businesses through ‘bringing about economic growth, improved productivity and a wider involvement in enterprise’ for all by: Building an enterprise culture. Encouraging a more dynamic start-up market Building the capability for small business growth Improving access to finance for small businesses Encouraging more enterprise in disadvantaged communities and under represented groups Improving small businesses’ experience of government services. Developing better regulation and policy. 9