1. Lecture 7

2. Chapter 4 Understanding Entrepreneurship & New Ventures

3. “Small” Business Locally owned and operated Vs Sony, Nestle Small Business Administration – Number of Employees – Total Annual Sales Independently Owned/Managed & Does Not Dominate Its Market

4. “Small” Business According to one recent extensive study Total SMEs in the country number around 2 million, of which approximately 0.4 million are manufacturing units, 0.6 million are service sector units and the remaining 1 million are in the retailing/trade sector.

5. “Small” Business According to the same study, SMEs constitute over 90% of the business establishments in Pakistan and contribute Rs. 34 billion (11%) annually to the GDP. Around 67% of the labour force in the Pakistani manufacturing sector works in SMEs engaged in manufacturing. Furthermore, 80% of the employment in the economy is created by SMEs.

6. “Small” Business However, statistics from the same study tell us that 72% of the SMEs are sole proprietary concerns with only one third of the owners receiving a college education. Additionally, only 3% have received any technical training.

7. “Small” Business In other words, the overwhelming bulk of SMEs are run in mostly an informal and unstructured manner as sole proprietorships, by people who have received little or no professional training and possibly have limited access to technical advice and financial resources.

8. “Small” Business Definition used by the State Bank of Pakistan: SME means an entity, ideally not a public limited company, which does not employ more than 250 persons (if it is a manufacturing concern) and 50 persons (if it is a trading/service concern) and also fulfills the following criteria of either “a” and “c” or “b” and “c” as relevant:

9. “Small” Business a. a trading/service concern with total assets at cost excluding land and building upto Rs 50 million. b. a manufacturing concern with total assets at cost excluding land and building upto Rs 100 million. c. any concern (trading, service or manufacturing) with net sales not exceeding Rs 300 million as per latest financial statements.

10. “Small” Business Definition used by the Federal Bureau of Statistics: – Small – Less than 10 employees.

11. “Small” Business Definition used by the Small Business Finance Corporation: “Small Business” was defined in the Small Business Finance Corporation Act to mean an industry or an industrial, manufacturing or trading unit, or such other concern, the total value of the fixed asset of which does not exceed Rs. 20 million while a “medium enterprise” is defined as an industrial, manufacturing or trading unit and such other concern the total value of the fixed assets of which does not exceed Rs. 100 million.

12. “Small” Business Definition used by the Punjab Small Industries Corporation: – Small – Fixed investment of upto Rs. 20 million (excluding land and building).

13. “Small” Business Definition provided by Small & Medium Enterprise Development Authority (SMEDA): – Micro – Less than 10 employees – Productive Assets upto Rs. 2 million. – Small – 10-35 employees – Productive Assets between Rs. 2 to 20 million. – Medium – 36-99 employees – Productive Assets between Rs. 20 to 40 million.

14. “Small” Business Recent Definition Proposal by SMEDA: – Micro – Less than 10 employees – Fixed assets including land & building – Rs. 2.5 million. – Small – 10 to 49 employees – Fixed assets including land & building – Rs. 45 million. – Medium – 50 to 249 employees – Fixed assets including land & building – Rs. 85 million.

15. Need For Small Businesses Job Creation (67% labour force works in small businesses Innovation – Products/Services (computer, radio, photocopier) – Processes Important To Big Business

16. Small Business Industries Services Construction Finance & Insurance (affiliates and agent) Wholesaling Transportation & Manufacturing (taxi, tour operators)

17. Entrepreneur Accepts Risks & Opportunities In Creating/Operating A New Business with a primary goal of growth and expansion Characteristics – Resourceful – Good Customer Relations – Desire To Be Own Boss- Gain Control Of Life – Build For Family – Tolerance For Uncertainty/Risk

18. Entrepreneurs YesterdayToday Self-ReliantOpen-Minded MaleMale or Female Quick Decisions Relies On Others

19. Non-Financial Reasons To Start A Business Source: CIBC World Markets, Economics & Strategy, “Secrets to Small Business Success”, research.cibcwm.com/economic_public/ download/sb-ssbs-10192004.pdf

20. Financial Reasons To Start A Business Source: CIBC World Markets, Economics & Strategy, “Secrets to Small Business Success”, research.cibcwm.com/economic_public/ download/sb-ssbs-10192004.pdf

21. Start/Operate Small Business Role of internet –Opportunities –Information access