Assessment 01

Literature review

Name: M. Firnas
Module: Issues in Small Businesses
Module code: MKT 2031
Nile ID: 17446212

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A small business according to the small business act (1953) is defined as one that is
independently owned and operated and which is not dominant in its field of operation. According
to European Union a small business is identified quantity wise where it has less than 50
employees and a turnover less than 10 million Euros (Storey, Greene, 2010). A small business in
one area isn’t a small business in a different area based on the market share, assets and profits.
Taking Carrefour for example which is Europe’s largest retailer is also considered a small
business where they set up in local markets along with single establishment business with the
same size shop, same number of workers. According to the author Storey and Greene (2010)
they mention that a necessary characteristic of a small business is the autonomy of running your
own business, this is arguable as this is not true. As the trend of entrepreneurship is booming it is
clearly visible that many small businesses have established and are not owned and managed by a
single owner; companies like readme.lk.
Growth in a small business is hard to define when considering the view of the entrepreneur,
growth can be; survival, personal satisfaction, meeting social and environmental needs, increase
in sales, profits and market share. According to Virginia Lewis the five stages of business growth
include Existence, Survival, Success, Take off and Resource Maturity (Lewis 2010).
Existence is the most crucial for any small business as many failures and million dollar
businesses happen here. There are several questions that needs answering for a business during
the existence stage such as; can we get enough customers, delivering of products and services,
increasing sales. Survival is a positive position as it demonstrates that it is a workable business
entity as they have customers who are satisfied with their products and services. The main issues
at this stage are; is breakeven possible in the short run, constant cash flow for growth and
covering up of cost. Success a beautiful yet crucial stage for entrepreneurs, at this stage
entrepreneurs have to make a wise decision whether to exploit the company’s accomplishments
or expand the company to be more profitable. Take off, the main turnover happens at this stage
where the total focus is on growth and the real question is how to grow rapidly and how to
finance that growth. Resource maturity, companies at this stage have great advantage over size,
financial resources, managerial talent and what their focus is on is to grow the business by
controlling finance and retaining the advantages (Lewis, 2014).
Skills and attitudes has been a trump in creating success stories, quick learners developed great
skills and created an edge over the others and attitude is what takes them to the top. Unlike
general skills and attitudes, entrepreneurial skills and attitudes are a highlight for any person as it
isn’t general but a set of skills that help in identifying a problem to solving it by implementing.
The OECD has identified three main groups of skills required by entrepreneurs; Technical skills,
Business management and personal entrepreneurial. Technical skills includes communication,
environment monitoring, problem solving, technology use and implementation, interpersonal and
organizational skills. Business management includes planning and goal setting, decision making,
human resource, marketing, finance and growth management. Personal entrepreneurial includes
self-control and discipline, risk management, innovation, leadership, persistence, networking and
strategic thinking (EU, 2014).

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Attitude is defined as mental and neural state of exerting readiness, organized through experience
exerting influence on the individual with regard to objectives and situation related (Tamizharasi,
Panchanatham, 2010). This is a strong factor which shines and drives the entrepreneur boosting
him with motivation. Attitude of an entrepreneur is clear, he jumps over all the hurdles and
focuses only on the goal. Persistence is brought out through this. Attitude towards risk is a
highlight only in entrepreneurs. Entrepreneurs are success and goal oriented, they build a
business out of scratch sacrificing their personal life and needs to see their business grow. They
are calculated risk takers and in a comparison between managers and entrepreneurs,
entrepreneurs had a clear margin to show they are risk takers and other qualities such as need for
achievement and preference for innovation (Curry, 2014). Their attitude towards risk has a direct
impact on the growth and success of the business. The entrepreneurial mindset on risk is totally
different from others; when the manager of a company would question the risk of training an
employee who can resign from work afterwards an entrepreneur would question the advantages
of training an employee and him continuing, thus is the attitude towards risk of an entrepreneur
(Curry, 2014).
The above mentioned skills and the attitude towards risk of an entrepreneur is required for the
growth and sustaining of a business. The Europe 2020 strategy focuses a lot on entrepreneurial
growth and mid set to benefit economically where member states have been invited to encourage
the development for entrepreneurial education and training system (EU, 2014). After the focus
on entrepreneurship there has been positive results where 37% of EU population prefer self-
employment and the enterprise survival rates have increased compared to the major competitive
market US (Stokes, 2010).
As much as businesses are growing a large number of small business shut down within the first
year of incorporation, the first two stages of growth has been survival and existence and to
satisfy the two important criteria is why an entrepreneur with good skills and a positive attitude
towards risk is required. According to statistics from Dun and Bradstreet 87% fail due to
management (Titus, 2004) and in Australia out of the 17% of startups in 2007 15% of them
failed in the same year (Stokes, 2010). Identifying the reasons for failure; lack of industry
experience, poor planning, lack of technology, bad location, poor cash flow management, no
sales experience, poor customer relations, lack of training (Seeletse, 2012).
The above figures make it clear that to run a business sustainably and help grow it an
entrepreneur should possess skills and to tackle situations face risks positively. An entrepreneur
should possess good management skills helping him to make the right decisions. The American
Management System is a great example to show the necessary skills an entrepreneur requires and
how his attitude towards risk should be in order to help grow a small business. The founder of
American Management System became the biggest and best known small business turn around
for having the right attitude, George Cloutier mentions that the business was professionally
confrontational to be successful and not nice. The attitude here wasn’t pleasing the customer but
doing the right thing no matter how harmful to the business it could have been, hence proving to
be successful (Carbonara, 2016). The decisions made were final and had no alteration, it was
concrete, when a question arose if they were willing to fire employees who have been with AMS

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for thirty years; the answer was yes and they even went on to cut off 10% of its customers who
were demanding and time consuming. This a dangerous move made by AMS which could cost
really bad when failed. The risk taken here; firing loyal employees and potential customers to
have a smooth flow. One requires analytical and strategic thinking to make such a decision. This
move is a risk but was well calculated to make them successful. Thus is an entrepreneur who
makes decisions out of the books turning the business to success (Carbonara, 2016).
It is a must for an entrepreneur to be a good humanitarian, to understand, control and get the
maximum out of their employees while keeping them happy and satisfied. Well+Good is an
online publication on health, fitness and beauty. They went on to 8 figure revenue while in a sea
of competition with just above 40 employees, whilst in the sea of competition where breakeven
is hardly visible what made well+good successful is at the back end. A sign of great leadership
and controlling and helping voice out the employees have helped in here, the strong culture in
the company is what has brought them victory (Alton, 2017). Managing the human resource is an
essential skills as it is a known fact people leave bosses and the company. A good leader can
make employees perform from good to great (Lowden, 2007). This is what has been practiced
and outcome of good practices is success and ease for the entrepreneur where he doesn’t have to
do all of the work where he can delegate task and authority (Itika, 2011).
The importance of having the willingness and positive attitude towards risk is clearly explained
by Britain’s best known entrepreneur Richard Branson. Branson says that one thing is certain in
business and that is everyone around is going to make mistake, he states that when growing up
pushing boundaries to succeed and achieve mistakes are inevitable and if a person makes no
mistake he makes nothing (Burns, 2014). Branson’s business growth is a clear example to prove
that from the start with the Student Magazine where a high school dropout risking his career to
start his own business and approaching celebrities and employing professionals for free to selling
his brand where he could be rejected without consideration and now to public relation profile for
a partnership where the brand value could be tarnished by a bad move (Burns, 2014).
The above few examples are clear to say that skills, attitudes and risk do contribute immensely in
the success and growth of small businesses. However factors that help grow a small business
does not end from there, there are other important factors which influence a business greatly and
aren’t a part of the entrepreneur directly.
There are several factors influencing the growth of a small business, though skills and attitude
towards risk of the entrepreneur that alone cannot be the reason for the growth as a small
business growth doesn’t solely depend on skills and attitude towards risk. Factors influencing
small business growth has been divided into three; Entrepreneur, firm and strategy. Entrepreneur
factor in here discusses, traits, skills, background of the entrepreneur and also gender, work place
experience, number of partners (Cooney, 2012). Apart from the other two important factors of
growth for a small business which are firm and strategy; entrepreneur factor alone lays the
weight on making us understand that skills and attitude alone aren’t substantial but also an
entrepreneur’s family background, his prior experience in working and managing businesses, the
amount of partners in the small business where there can be conflicts and misunderstandings, his
level of education which has a great impact in the current market as there so many legal

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frameworks and those who have a good educational background has an edge over the others as
they would have already learnt which other entrepreneurs will have to work and experience it
which is a risk and could be mitigated by having a knowledge on it (Lowden, 2007). There are
also factors which are sensitive to stereotypes and highly arguable such as gender and age.
Considering the other two remaining factors for small business growth which are firm and
strategy;
Firm, this is the type of business, size and all of its features and characteristics going from age;
this is a vital factor as most small businesses fail within the first year of operation (Stokes, 2010).
Sector, legal form; which has a huge impact in the market that it caters in, sole proprietorship
and partnership businesses have no separate legal entity and are not very welcomed by well
established companies and corporates to have deals as there is a barrier in trusting and in liability
to repay, in this case a private limited is most recommended and encouraged (BIS, 2011).
Location; identifying a good business location is necessary for a business growth as it should be
accessible by its customers and suppliers, entrepreneurs have failed by having established in the
wrong location even while having the best management and great business idea which is feasible
(Machado, 2016). Location also bring in more advantages such as; co-locating, pools of labour,
cost advantages and knowledge spill over (Storey, Greene, 2010). Size and ownership. These are
sub factors under firm for small business growth.
Strategy; sub factors of strategy are workforce training, management training, external equity,
technology, market position, market adjustments, planning, new products, management
recruitment, state support, customer concentration, competition, information and advice
(Cooney, 2012). Workforce training is a boost for small businesses for their performance and in
the UK only 30% of small businesses are interested in training and these employees belong to
innovative entrepreneurs, firms that train their employees are less likely to shut down than firms
that do not (stone, 2010). Training the work force has been reasons for business growth through
increase in employee productivity, motivation, retention and improvement in skills (Kulkarni,
2013). Use of technology has a positive impact on businesses, through the development in IT and
technology work has been broken down and made easy, more over it has replaced labour to
machinery (salter, 2017). Adapting of technology which is also IT in businesses has become
mandatory in order to survive, sustain and using it the best way to grow. The market place is
rapidly drifting to e-commerce where drones are being tested for effective delivery purpose and
marketing being totally internet based (Thimothy, 2017). Technology is out of topic which helps
in business growth where a smart and an entrepreneur who adapts to changes will benefit from.
Catering to the mobile phones users has become need of the hour where almost every business
should have facilities and services such as mobile website, application and payment methods as
through a survey it was identified that 56% of traffic to a government website was through
mobile phone and mobile phone penetration worldwide is expected to be 7billion by 2020
(Campbell, 2017).
For the success of a small business apart from skills of an entrepreneur and his/her attitude
towards risk there are also other important factors which affect and was evident above. Factors
such as age and gender, level education, legal structure of the business, location, training of

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employees and adapting technologies are highlighted factors of success which have no close call
to skills or attitude but what a smart entrepreneur would adapt and is necessary for growth.
Factors like age and gender are matter of time which cannot be altered or changed through any
skill nor attitude and this is clearly stated in the book small business and entrepreneurship by
Storey and Green, it states that the prime age of an entrepreneur for building a successful
business and to grow them is between 35-50 and out of the 15 study’s with regard to gender 8 of
them states that it is the males’ who have been successful in growing the business (Storey,
Greene, 2010). Likewise there are several factors that the growth of small businesses depend on
which are not visible directly but are learnt and understood through experiencing and practicing
and even failing.

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References
Storey, D, Greene, F. (2010) Small business and Entrepreneurship. First Edition.
Edinburgh: Pearson.
Lewis (2010) The Five Stages of Small Business Growth. Harvard business review
[online]. Available from: https://hbr.org/1983/05/the-five-stages-of-small-business-
growth [Accessed 25th February 2018].
Lewis, V. (2010) The five stages of small business growth. The five stages of small
business growth. 22(17), pp.1-7.
European Commission (2014) focus on Entrepreneurial skills. EU skills
panaroma [online]. Available from:
http://skillspanorama.cedefop.europa.eu/sites/default/files/EUSP_AH_Entreprene
urial_0.pdf [Accessed 26th February 2018].

Tamizharasi, G, Panchanatham, N. (2010) Entrepreneurial Attitudes among

Entrepreneurs in Small and Medium Enterprises. International Journal of Innovation,
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Curry, J. (2014) a closer look at entrepreneurship and attitude toward risk. Master. Bowling Green
State University.
Stokes, D, Wilson, N, Mador, M. (2010) Entrepreneurship. 6th ed. Hampshire: Cengage.
Titus (2004) Key Reasons Why Small Businesses Fail. Summit business solutions [online]. Available
from: http://www.summitbusinesssolutions.ws/docs/reasons_biz_fail.pdf [Accessed 26th February 2018].

Seeletse, S. (2012) Common causes of small businesses failure in the townships of West
Rand district municipality in the Gauteng Province of South Africa. African Journal of
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Carbonara (2016) Tough Love For Small Business: 'Nothing Happens Until Somebody Cries'. Forbes
[online]. Available from: https://www.forbes.com/sites/petercarbonara/2016/01/20/tough-love-for-small-
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Alton (2017) 4 Small Business Success Stories Worth Learning From. The
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Lowden, J. (2007) Managerial Skills for the Entrepreneur. Emerald.
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Burns, P. (2014) new venture creation. 1. Hampshire: Palgrave Macmillan.

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Cooney, T. (2012) Entrepreneurship Skills for Growth-Orientated Businesses.
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Machado, H. (2016) Growth of small businesses: a literature review and perspectives of

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Kulkarni, P. (2013) a literature review on training & development and quality of work
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Salter (2017) Small Businesses Adopting Technology Is Key To Raising

Productivity. Forbes [online]. Available from:
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Their Company Using Digital Marketing. Forbes [online]. Available from:
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