Académique Documents
Professionnel Documents
Culture Documents
Expanded Features
PDF Unlimited Pages
Documents
Complete
A small business is defined in various ways by using terms: micro and small enterprises (MSE),
small and medium scale enterprises (SMEs) interchangeably. The commonly used yardstick in
categorizing small businesses include the total number of employees, total investment and sales
turn over.
In the context of Tanzania, micro enterprises are those engaging up to 4 people employing
capital amounting up to Tsh. 5.0 million. The majority of micro enterprises fall under the
informal sector.
Medium enterprises employ between 50 and 99 people or use capital investment from TShs.200
million to TShs.800 million.
Large enterprises employ over 100 people or use capital investment from above TShs.800
million
1
Click Here & Upgrade
Expanded Features
PDF Unlimited Pages
Documents
Complete
Paid employment
Paid (wage) employment is the act of supplying some form of human labour to the production
process with the aim of getting remuneration. It is a type of employment where a person is
employed in an organization (public/private) for a specific monthly wage. Wage earners
generally have little or no investment in the business they work for. The only form of investment
can be in form of insurance and provident fund where they contribute a minimum sum of money
commonly deducted from the salary for maintaining the security of an employee.
i. There is job security for employees, this is covered in the labour laws which protect
employees from employers unjust treatment.
2
Click Here & Upgrade
Expanded Features
PDF Unlimited Pages
Documents
Complete
ii. Assurance of getting a uniform and predictable salary regardless of whether the
organization is working profitably or not. So there is minimal risks in terms of payment
schedules.
iii. Employees have a potential for advancement based on how well their work performance
is, how well they get along with the boss and fellow workers, and whether the
organization can give the employees opportunities to advance.
iv. There are some benefits accrued from being a wage employee, including paid holidays
and vacations, maternity leave for females, sick leave, overtime, entitlement to pension
and other social security funds at the end of employment period or death.
v. There are regular and fixed working hours. Working longer than the specified time leads
liability to overtime payments.
vi. The employees do not bear a risk of losing income (in form of capital) through business
failure.
i. The work is organized in such a way that every employee is furnished with
responsibilities, rules and regulations. They are liable for punishment if they fail to
perform as required and are unable to comply with the specified rules and regulations so
there is no independence since the employees have to follow orders.
ii. There is risk of losing job by being laid off.
iii. The employees do not have the right to any profit as they are not owners of the business
and the income is fixed.
iv. There is a limitation of action, responsibility and decision making due bureaucracy. This
limits personal freedom and professional growth of employees and makes it difficult to
implement ideas.
v. Individual ability not easily recognized.
vi. There is high dependence on the employer.
3
Click Here & Upgrade
Expanded Features
PDF Unlimited Pages
Documents
Complete
Self-Employment
This is the type of employment where a person engage himself/herself in an economic activity
for gaining income in a profitable business.
Advantages of self-employment
Disadvantages of self-employment
4
Click Here & Upgrade
Expanded Features
PDF Unlimited Pages
Documents
Complete
iv. Independence versus dependence condition: There is a need to cope with a wide range of
stakeholders ie. customers, employees, suppliers, tax-people, government authorities etc.
most whom can dictate and or influence business operations, business status, and the
marketability and sale-ability of the products/service etc. So there is no complete
independence because there is dependence on the stakeholders who have also depend
on the business.
v. There are long irregular hours of work.
vi. There are broad responsibilities.
vii. Income is not stable or guaranteed.
viii. There are no fringe benefits.
ix. Owner always involved in finances
x. The future is uncertain due to perpetual changes in the business environment which is
influenced by many factors such as the market trends, customer tastes, technological
advancements etc.
xi. The owner have to learn always
xii. It is hard to delegate
xiii. Involves a lot of paper work
These reasons fall into two categories: The PUSHES and the PULLS.
5
Click Here & Upgrade
Expanded Features
PDF Unlimited Pages
Documents
Complete
Every business has to pass through various stages of development regardless of its size. These
stages include Start-up Phase, Survival Phase, Growth Phase and Stabilization Phase. Some
businesses start fast, grow fast, and fail or succeed fast. Others start small and stay small, by
design. Many small businesses start slowly, then build fast, grow faster, buy other companies, or
get sold and melded into larger organizations.
6
Click Here & Upgrade
Expanded Features
PDF Unlimited Pages
Documents
Complete
Start-up phase is that phase during which a business comes into existence. The process begins
by acquiring motivation, finding/generation business idea, validating the idea, identifying the
resources, `negotiating to get into business and birth of the business. In this process business
planning is carried out once a business idea is confirmed to be valid.
Acquiring Motivation
Birth
i. Acquiring motivation
This is the process of finding the stimulus and commitment to pursue the objective of
setting up a business. In this process it is important to assess and develop ones
capabilities for setting up and running a business. Therefore there is a need to expose and
familiarize oneself to entrepreneurial and managerial tasks and determine the rewards
involved in setting up and running a small business.
7
Click Here & Upgrade
Expanded Features
PDF Unlimited Pages
Documents
Complete
Surveying to find out: Community needs not presently met, Inadequately met
markets/demands, Support needs of existing businesses in the are e.g. sub-
contracting opportunities.
This is the act of justifying the strength of the business idea in terms of its viability,
practicability and achievability when it is transformed into a business. The best method to
do this is through carrying out a market research in order to collect information/ data on
customers, competitors, machinery/technology etc.
Human resources
This is the manpower required for production and other business operations which can be
identified through knowledge about:
-Types of skills and expertise and experiences needed for business operations
-Functions, types of jobs and tasks in relation to skills and experience in business
operations
8
Click Here & Upgrade
Expanded Features
PDF Unlimited Pages
Documents
Complete
-Benefits and remunerations that the business owner can afford to pay
-Sources of recruitment i.e. your own family and friends, persons working in other
industries, employment centres, newspaper advertisements. Universities, Colleges and
other Institutions.
Financial Resources
These include money that is required to start and operate the business. identification of
financial resources is guided by:
-Investment capital requirements ie. how much capital you need for investment in terms
of business premises (decision should be made if the premise has to be constructed,
bought, rented of the business will be run form home) and equipment: machines,
vehicles, workshop fittings, furniture etc. (decisions have to be made if the equipment
will be purchased or leased).
-Working capital requirements ie. the money required to pay expenses. These cover the
costs of raw materials and other supplies, wages, rent, insurance, advertisement &
promotion and other costs needed for business operations.
-Sources of finance which include (a) internal sources of finance such as own savings,
Personal borrowing from relatives and friends and money raised through mortgage of
personal assets like land, buildings etc. and (b) External sources of finance such as
government funds through its ministries and organizations eg. SIDO, NGOs providing
short term credits and grants, commercial banks, venture capital fund and private money
lenders.
Technology encompasses the knowledge and skills and machinery, equipment and tools
applicable for production purposes in both industries and other similar settings.
Identification/choice of technology is guided by:
-Plant size and capacity ie. how large the industry/ machines are, and the number
/volume of units that can be manufactured by the machines in a given period.
9
Click Here & Upgrade
Expanded Features
PDF Unlimited Pages
Documents
Complete
Infrastructure:
10
Click Here & Upgrade
Expanded Features
PDF Unlimited Pages
Documents
Complete
-Advertisement and recruitment of qualified key staff for performing various tasks and
duties
-Purchase of raw materials and other supplies and storage
vi) Birth
This is the process of implementing the business plan. It involves the actual business
business plan.
11
Click Here & Upgrade
Expanded Features
PDF Unlimited Pages
Documents
Complete
Sole proprietorship
This is a type of business formed, owned and controlled by one person. The business owner is
not legally separated from the business. It has less government control and there is no income tax
on the business only on the owner. The business is terminated upon the death of the owner.
(N.B. Most SMEs in this country operate in this form of business ownership).
Advantages:
i. Simple in organization.
Disadvantages:
i. Owners lack of ability and experience might hinder progress/growth of the business.
ii. Difficult to attract and keep good employees.
iii. Difficult to raise capital required by the business.
iv. Proprietor has unlimited personal liability for business debts.
v. Proprietor takes responsibility of all losses made by the business.
Partnership
This is a type of business formed by two or more persons who come together for the purpose of
establishing and running a business and sharing profits. Business partners have to enter into a
partnership agreement. This agreement should cover:
12
Click Here & Upgrade
Expanded Features
PDF Unlimited Pages
Documents
Complete
There is general partnership in which all partners are active in management and are jointly
responsible for the business and all its debts. There is also limited partnership in which there is
one or more who manage the business while other partners contribute to capital but do not
manage the business. Limited partners are not jointly responsible for all the debts of the business.
Advantages:
Disadvantages
Limited Company
This is a form of business which is legally a separate body from persons ie. shareholders who
own it. The company owns assets, makes contracts and conducts business transactions in its own
capacity as legal entity. Memorandum of Articles of Association is filed by the Registrar of
Companies for registration who the issues a certificate of incorporation signifying that the
limited company is formed. A company is owned by one or more people. It may offer
shares/issue stock to the public, in this case it is termed as public company..
Advantages:
13
Click Here & Upgrade
Expanded Features
PDF Unlimited Pages
Documents
Complete
Disadvantages
Cooperative
A cooperative is formed by a number of people who decide to work together voluntarily. All
members are equal and have equal voting powers. A cooperative must be registered with the
Registrar of Cooperatives.
Advantages
Disadvantages
Franchise
This is a business involving buying trade rights from a large business. For example Coca-Cola
Production company.
14
Click Here & Upgrade
Expanded Features
PDF Unlimited Pages
Documents
Complete
This is the stage in which the business has demonstrated that it is a workable business entity. It
is widely accepted that three out of five businesses cease to trade in the first five years. Therefore
to avoid failure, this stage should be considered as a period of learning even when the business
has enough customers and satisfies them sufficiently. This can be done by assessing important
business issues. These include:
Idea
In this case it is important to (i) keep a data- base on customers (ii) improve business by
providing better, cheaper and faster services (iii) and search for new markets for
products/services.
Resources
This involves keeping staff records on their performance & productivity and putting in place a
system to control utilization, efficiency, wastage and quality standards.
15
Click Here & Upgrade
Expanded Features
PDF Unlimited Pages
Documents
Complete
Finance
Therefore it is important to plan for a good cash flow management and develop appropriate
trading, profit and loss forecast and budget systems.
Management
16
Click Here & Upgrade
Expanded Features
PDF Unlimited Pages
Documents
Complete
Business growth is in terms of increasing in size, profitability, turnover, capital etc. Businesses
grow by developing profitable products or markets, by improving the processes ie. becoming
more efficient or by combination of the above. There are a number of factors that influence the
capacity of small business to grow. These include the three Ps of growth which are:
i. The Performance- Past and present: How good is the business performance in the
market, in its operations and in financial terms.
ii. The Potential- Capacity of the business to grow: How strong is the business potential for
growth in terms of resources, experience, control, ideas and leadership.
iii. The Project- The specific growth plan: How sound is the specific growth project in terms
of objectives, the scale of resources requirement, management ability & commitment
and financial projections.
3. Planning
(The project)
17
Click Here & Upgrade
Expanded Features
PDF Unlimited Pages
Documents
Complete
Market
Proposed product/service
Evidence of customer acceptability at the price, ability to manufacture/service,enough
customers, ability to enter market, ability to match competition or better, how to reach
customers
Market potential trends
Competitive advantage
Resource Requirements
Financial projections
18
Click Here & Upgrade
Expanded Features
PDF Unlimited Pages
Documents
Complete
Contingency provision
Small businesses have to plan development around opportunities presented by products, markets
and processes. According to Igor Asoff business growth can be achieved through market and
product.
Market Market
Old Product Penetration Development Old Product
Product Diversification
Most important, results of project evaluation are important in ensuring business growth is
successfully achieved.
During growth:
(i) Businesses experience expansion of its activities and enhancement of its customer base.
(ii) Products and services are gaining acceptance in the marketplace and customers are
patronizing them in increasing numbers.
(iii) Profit margins tend to increase.
(iv) Business require infusion of additional capital to buy capital equipment to increase
production (for manufacturing businesses), to establish additional service network (for
service providers) or procure more goods for trade (for trading businesses).
19
Click Here & Upgrade
Expanded Features
PDF Unlimited Pages
Documents
Complete
Maturity/Stabilization Phase:
This is the third stage of a business development. During this phase cash flows stabilize and
establishment of marketing networks and operational channels are completed. The respective
brands become well known and there is a stable and faithful customer following.
20