The document discusses small businesses. It defines small businesses as those involving less capital investment, fewer employees, and smaller machinery. Small businesses play an important role in economic development. They are typically locally owned and operated. The document outlines various categories of small businesses based on investment levels, ownership, exports, and location. It also discusses the roles of small businesses and common problems they face such as lack of financing, raw materials issues, limited managerial skills, difficulties obtaining skilled labor, and marketing challenges.

1. SMALL
BUSINESS
By
Dr.D.RAVINDER
MBA,PhD.
9/22/2021 Dr.D.Ravinder, Associate Professor, Depot of Business Management, Vaagdevi College of Engineering,
WGL,T-S, (ravinder.d17@gmail.com) 1

2. Small Business Meaning
A business which functions on a small-scale level involves less
capital investment, a smaller number of labor and fewer machines to
operate is known as a small business.
9/22/2021
Dr.D.Ravinder, Associate Professor, Depot of Business Management, Vaagdevi College of Engineering,
WGL,T-S, (ravinder.d17@gmail.com) 2

3. Small Business
 Small scale Industries or small business are the type of industries that
produces goods and services on a small scale.
 These industries play an important role in the economic development of a
country.
 The owner invests once on machinery, industries, and plants, or take is a
lease or hire purchase.
 These industries do not invest more than one crore. Few examples of small-
scale industries are paper, toothpick, pen, bakeries, candles, local chocolate,
etc., industries and are mostly settled in an urban area as a separate unit.
9/22/2021
Dr.D.Ravinder, Associate Professor, Depot of Business Management, Vaagdevi College of Engineering,
WGL,T-S, (ravinder.d17@gmail.com) 3

4. Characteristics of Small-Scale Industries
 Ownership: They have a single owner. So, it is also known as a sole
proprietorship.
 Management: All the management works are controlled by the owner.
 Limited Reach: They have restricted area of operation. So, they may be a
local shop, or an industry located in one area.
 Labor Intensive: Their dependency on technology is very little because they
are dependent on labors and manpower.
 Flexibility: Because they are small, they are open and flexible to sudden
changes, unlike large industries.
 Resources: They utilize local and immediately available resources. They do
better utilization of natural resources and limited wastage.
9/22/2021
Dr.D.Ravinder, Associate Professor, Depot of Business Management, Vaagdevi College of Engineering,
WGL,T-S, (ravinder.d17@gmail.com) 4

5. Categories of Small Business
(1) Small Scale Industry (Before 2006)
They invest in fixed assets of machinery and plant, which does not surpass than
one crore.
For export improvement and modernization, expenditure ceiling in machinery and
plant is five crores.
(2) Ancillary Small Industrial Unit
This industry can hold the status of an ancillary small industry if it supplies a
minimum 50 per cent of its product to another business, i.e., the parent unit.
They can produce machine parts, components, tools or standard products for the
parent unit.
9/22/2021
Dr.D.Ravinder, Associate Professor, Depot of Business Management, Vaagdevi College of Engineering,
WGL,T-S, (ravinder.d17@gmail.com) 5

6. Categories of Small Business
(3) Export Oriented Units
This industry can possess the status of an export-oriented unit if it exports
exceeds 50 per cent of its manufactures.
It can opt for the compensations like export bonuses and other grants awarded
by the government for exporting units.
(4) Small Scale Industries Owned by Women
An enterprise operated by women entrepreneurs in which they alone or combined
share capital minimum of 51 per cent. Such units can opt for the special grants
from the government, with low-interest rates on loans, etc.
9/22/2021
Dr.D.Ravinder, Associate Professor, Depot of Business Management, Vaagdevi College of Engineering,
WGL,T-S, (ravinder.d17@gmail.com) 6

7. Categories of Small Business
(5) Tiny Industrial Units
It is an Industrial or a company whose expenditure on machinery and plant does not
exceed Rs. 25 lakhs.
(6) Small Scale Service and Business
It is a fixed asset investment on machinery and plant excluding land and building should
not surplus Rs. 10 lakhs
(7) Micro Business Enterprises
It is a tiny and small business sector.
The investment in machinery and plant should not exceed Rs.1 lakh.
9/22/2021
Dr.D.Ravinder, Associate Professor, Depot of Business Management, Vaagdevi College of Engineering,
WGL,T-S, (ravinder.d17@gmail.com) 7

8. Categories of Small Business
(8) Village Industries
The industries which are in rural areas and manufacture any product performs
any service with or without the utilization of power is called village industries.
They have fixed investments on capital as per head, workers, and artisan, which
does not exceed Rs.50, 000.
(9) Cottage Industries
It is also known traditional or rural industries.
These industries are not covered by the capital investment criterion
9/22/2021
Dr.D.Ravinder, Associate Professor, Depot of Business Management, Vaagdevi College of Engineering,
WGL,T-S, (ravinder.d17@gmail.com) 8

9. Role of
Small
Businesses
in India
Industrial Units
Labour-oriented
Human Resource
Utilization of Local Resources
Flexible and Adaptable
9/22/2021
Dr.D.Ravinder, Associate Professor, Depot of Business Management, Vaagdevi College of Engineering,
WGL,T-S, (ravinder.d17@gmail.com) 9

10. Problems of Small Businesses
Finance
The major small business problems faced is the inadequacy of funds to
funnel in the operations. This hinders the business from developing. The
small business does not have enough creditworthiness that is important
in the capital market, and thus there are financial problems faced by
small businesses. The industrial investors or the banks ask for collateral
as security. The small businesses operate in the semi-urban and rural
areas, and this makes it difficult for them to get their finances.
9/22/2021
Dr.D.Ravinder, Associate Professor, Depot of Business Management, Vaagdevi College of Engineering,
WGL,T-S, (ravinder.d17@gmail.com) 10

11. Problems of Small Businesses
Raw material
Businesses need raw materials for production. They need some input to generate
output. The raw material quality is the challenges faced by small businesses as it
depends on what is inputted into it. However, it is possible that because the
small business is tight on the budget, they are not able to get raw materials of
good quality. Also, because these industries purchase in small lots, they do not
have a lot of bargaining power. The storage facility is also an issue here.
Therefore, the small business needs to be quick to produce and to sell the goods.
This is among the major problems of small-scale business because they cannot
hold on to their inventories for long.
9/22/2021
Dr.D.Ravinder, Associate Professor, Depot of Business Management, Vaagdevi College of Engineering,
WGL,T-S, (ravinder.d17@gmail.com) 11

12. Problems of Small Businesses
Managerial Skills
The small business operations are done by limited employees. In most
cases, a single person only will manage all the operations. The manager
has a lot of pressure to meet production demands. Also, it is possible
since the small business cannot hire well-read managers. The managers
may lack the basic managerial skills that are needed to operate any unit.
These are the challenges of small business.
9/22/2021
Dr.D.Ravinder, Associate Professor, Depot of Business Management, Vaagdevi College of Engineering,
WGL,T-S, (ravinder.d17@gmail.com) 12

13. Problems of Small Businesses
Skilled Labor
Skilled labor is among the problems of small-scale enterprises. Small businesses
have a fund shortage because of which they are not able to employ skilled labor
to do the job, which is one of the challenges of small-scale business. They cannot
pay very high wages to their employees, and thus they must make do with a low
skill level. This results in a productivity drop, and the labor rates are high. This
again is a major concern in the production operations.
9/22/2021
Dr.D.Ravinder, Associate Professor, Depot of Business Management, Vaagdevi College of Engineering,
WGL,T-S, (ravinder.d17@gmail.com) 13

14. Problems of Small Businesses
Marketing
Here are the small business marketing problems. The small business
needs to sell the product to make profits, and for this, they need a
marketing channel. The business needs a marketing channel that can help
it achieve its sales goals. Because of the lack of infrastructure, direct
marketing is not possible for these companies and is one of the problems
of small entrepreneurs. The lack of funds hinders the small business to
hire a middleman to make the sales. These middlemen exploit these
companies by paying a low price and delaying payments. This is another
of the challenges facing small business enterprises.
9/22/2021
Dr.D.Ravinder, Associate Professor, Depot of Business Management, Vaagdevi College of Engineering,
WGL,T-S, (ravinder.d17@gmail.com) 14

15. Thank You
9/22/2021 D r . D . R a v i n d e r , A s s o c i a t e P r o f e s s o r , D e p o t o f B u s i n e s s M a n a g e m e n t ,
V a a g d e v i C o l l e g e o f E n g i n e e r i n g , W G L , T - S , ( r a v i n d e r . d 1 7 @ g m a i l . c o m ) 15