Entrepreneurs

hipSMALL BUSINESS

An enterprise refers to a business or an

organization engaged in the

manufacturing or trade of goods,

services, or both to consumers .

ENTERPRISE

In every economy we see businesses of various sizes such as

Micro, Small and Medium

Enterprises

ENTERPRISE

We can say a business is small if it has

Independent management

Owner supplied capital

Mainly local area of operation

Relatively small size within an industry

WHAT DO WE MEAN BY A SMALL

BUSINESS?

A small business is one that is

independently owned and operated

and in not dominant in its field of

operation.

DEFINITION OF SMALL BUSINESS

Small businesses provide goods as services as well as serve as a nursery of entrepreneurial and managerial talent.

Initially the capital investment is small and the technology used is low, so it becomes easy for first time entrepreneurs to set up a venture.

WHY FOCUS ON SMALL BUSINESS?

It provides an opportunity for entrepreneurs to hone their

skills and talents, to experiment, to innovate and transform

their ideas into goods and services needed by the society

It creats job opportunities for millions of people, including

many with low levels of formal education.

Small-scale sector has emerged as an engine of growth

Employment Generation

Low Initial Capital Investment

Balanced Regional Development

Equitable Distribution of Income

Exports

Development of Entrepreneurship

WHY FOCUS ON SMALL BUSINESS?

IMPORTANCE OF SME’S

Large Enterprises

Medium Enterprises

Small Enterprises (Formal Sole proprietorship, Partnerships and companies)

Micro Enterprises (Informal)

91000 SME ’S

THEY FORM 90% OF ALL BUSINESSES IN OMAN

40% OF THESE BUSINESSES ARE RETAIL SECTOR

HOW MANY SMALL & MEDIUM

BUSINESSES IN OMAN?

Business Enterprise Number of employees

Annual Sales

Micro Fewer than 5 workers Less than RO 25,000

Small 5 – 9 workers RO 25,000 to RO 250, 000

Medium 10 – 99 workers RO 250,000 to RO 1.5 m

WHAT IS SMALL?

Sole proprietorship: A sole proprietorship is a business owned

by one person for-profit. The owner may operate the business

alone or may employ some workers or staff.

Partnership: A partnership is a business owned by two or

more people. In most forms of partnerships, each partner has

unlimited liability for the debts incurred by the business.

Corporation: corporations are big companies and they can be

either government-owned or privately -owned. The board of

directors is elected to manage the companies.

WHAT FORMS OF ORGANIZATIONS DO

THESE BUSINESSES FOLLOW?

40% OF THESE BUSINESSES ARE RETAIL SECTOR

Retail Trade / Wholesale Trade:

Example: Departmental stores, shops selling Gifts, perfumes

and chocolates, cloths and garments (online retail)

Services:

Example: barber shop, restaurant, tour operators, travel

agency, dentist shop, shoe repair shop, photographer shop

Small Manufacturing Enterprises:

Example: bread making enterprises, soap making enterprises,

note book making enterprises FURNITURE

Handicrafts:

IN WHAT INDUSTRIES ARE THESE SME ’S

ESTABLSIHED?

Agriculture, agro based products, fisheries and livestock:

Farming and cultivation of various crops and vegetables is

called agriculture and the processing and the sale of the fruits

and other cultivated products refers to agro based business.

Agriculture, livestock (animal farms) and fisheries are among

the oldest and most important sectors of the Omani economy.

IN WHAT INDUSTRIES ARE THESE SME ’S

ESTABLSIHED?

Low startup capital :

With a small sum of money a small business can be started.

Ease of entry and exit :

With a small sum of money one can set up a corn/ popcorn shop, we can easily start and easily exit the business.

Operational flexibility :

Small businesses have the advantage of operational flexibil ity as the sole proprietor makes decisions which are taken quickly and without any major delays.

More satisfied customers – Personal Touch:

Customers are more satisfied as owners are easily approachable. They are dealt face to face.

ADVANTAGES OF SMALL BUSINESSES

Lack of Capital – Financial Limitat ions :

Lack of capital obviously hinders the expansion of most small businesses. Due to their size, small businesses are unable to attract bank financing.

Lack of Managerial Ski l ls :

Small businesses may face problem of management as they are only dependent on the owner(s) managerial ski l ls.

Lack of adequate technology :

Small businesses find it dif ficult to cope ( manage ) with the rapid changes in science and technology. This is because they do not have the capital to use new technology.

Lack of exper t staf f :

It is dif ficult to hire or take consultancy from experts as they lack capital .

Risk of losing business

DISADVANTAGES OF SMALL BUSINESSES

HOW SMALL BUSINESS

IS FORMED?

1 . Search for and ident i fy the business oppor tunit ies

The l i s t o f possible products/ser v ices/ ideas is a lmost unl imited.

Oppor tunit ies

Ex ist ing industr y dynamics and p layers

Competi tors

Best pract ices f rom other industr ies

Entrepreneurship Development Cel l

Conferences and Workshops

Journals and magaz ines cont r ibut ing ins ights in the form of papers and ar t ic les on ent repreneurship

Day to day interact ion wi th bus iness stakeholders

Foreign v is i ts by a prospect ive ent repreneur

The best p lace to s tar t searching is to f ind your appropr iate market n iche.

Niche Market ing is the process of f inding a smal l - but profi table – demand for something, and then producing a custom -made product for that market .

STEPS IN STARTING A SMALL BUSINESS.

2. Study the market feasibility of the products / opportunities .

Estimating the size of the market.

Estimating the competition.

Estimating your share of the market.

STEP 2

Decide whether to start a new business, buy an existing one,

or buy a franchise .

Decision to start a new business

Reasons for starting a new business

Owner ’s freedom to:

Define the nature of the business.

Have a free hand in selecting and developing business and

personnel.

Take advantage of the latest technology, materials and tools.

Select a competitive environment.

STEP 3

Reasons for buying an existing business

Personnel are already working.

The facilities are already available.

A product is already being produced for an existing market.

The location may be desirable.

Relationships have been established with banks and trade

creditors.

Revenue and profits are being generated, and goodwill exists.

DECISION TO BUY AN EXISTING BUSINESS

Franchise – a business l icensed to sell a company ’s product exclusively in a particular area or to operate a business that carries that company ’s name.

Examples: McDonalds, KFC, Pizza Hut, Starbucks

Franchisor – The franchisor refers to the companies that own trademarks (brand name) and products, which gives the right to the franchisee to use the trademarks and sell products and services in a different location. The franchisor gets an agreed -upon fee.

Franchisee - A business owner who gets the right to sell goods or services of a company, in exchange for some payment/ fee

DECISION TO BUY A FRANCHISE

Reasons for buying a franchise

The franchiser and franchisee desires the success of the other.

The franchiser brings proven and successful methods of operation and obtains guidance from experienced people by obtaining a franchise.

The market niche has been identified, and sales activit ies are in place.

Reasons for not buying a franchise

The best business being franchise is costly.

Expenses include investments and fees, as well as royalty payments.

New franchisees face far greater financial r isk .

The best franchise is not a guarantee of success.

The franchisee may not have enough independence.

DECISION TO BUY A FRANCHISE

DEVELOPING MARKETING STRATEGIES - How to Market the Products?

Sett ing Object ives.

Market ing object ives should be t ied in wi th your compet i t ive edge and f low f rom your mission statement .

A compet i t ive edge / compet i t ive advantage is a par t icular character is t ic that makes a f i rm more at t ract ive to customers than i ts r i va ls . Your compet i t ive edge is something that customers want and only you can supply which g ives you an advantage over your compet i tors . Some factors that might provide such an advantage are qual i ty, re l iabi l i ty, integr i ty, and ser v ice as wel l as lower pr ices .

Choosing Target Market

A target market i s the par t o f the tota l market toward which promotional ef for ts are concentrated. Use market segmentat ion.

Market segmentat ion is the d iv is ion of the market for a product in to groups of cus tomers wi th ident i f iable needs and character is t ics .

Developing an E f fect ive Market ing Mix

A market ing mix is the proper b lending of the basic e lements of product , pr ice , promotion and p lace into an integrated market ing program.

SMALL BUSINESS ADMINISTRATIVE

FUNCTIONS

• Moving quickly to satisfy customers ’ needs.

• Using pricing to dif ferentiate the product.

• Paying attention to packaging.

• Building customer ’s loyalty.

• Offering samples and demonstrations.

• Aligning at specialized market segments .

Localizing business.

Providing personal touch.

Providing technical repair services.

SUGGESTED MARKETING STRATEGIES

FOR SMALL BUSINESS

Advertising is a form of commercial mass communication designed to promote the sale of a product or service, or a message on behalf of an institution or organization. Thus, it informs customers of the availabil ity, desirabil ity and uses of a product.

Forms of Advertising

The most popular advertising media used by small businesses are display ads in television, newspapers, radio, store signs, direct mail, circulars, handbills, yellow pages ads, outdoor signs and internet.

2. ADVERTISING THE PRODUCT

Merchandising is promoting the sale of a product at the point of purchase. It is the way the product is presented to customers, including window displays, store banners, product label and packaging and product demonstration.

Sales promotion includes marketing activities (other than advertising and personal sell ing) that stimulate consumer purchasing and dealer effectiveness.

Consumer Promotions use coupons, discounts, contests, trading stamps, samples, rebates, etc.

Trade Promotions includes free goods, buying allowances, merchandise allowances, cooperative advertising and free items given as premiums.

Sales Force Promotions consists of benefits, such as contests, bonuses, extra commissions, and sales rall ies.

Publicity is information about a business that is published or broadcasted without charge.

3. PROMOTING THE PRODUCT

Business Plan

The business plan is a written document prepared by the

entrepreneur that describes the external and internal

elements involved in starting a new venture.

A business plan is a written narrative that describes what a

new business plans to accomplish.

Who Reads the Business Plan—And What Are They Looking

For?

Business Plan - Dual-Use Document

For most new ventures, the business plan is a dual -purpose

document used both inside and outside the firm.

There are two primary audiences for a firm ’s business plan.

BUSINESS PLAN

Audience What They are Looking For

A Firm’s Employees

(used inside)

A clearly written business plan helps the employees of a

firm operate in sync and move forward in a consistent

and purposeful manner.

Investors and other external

stakeholders

(used outside)

A firm’s business plan must make the case that the firm

is a good use of an investor’s funds or the attention of

others.

THERE ARE TWO PRIMARY AUDIENCES

Guidelines for Writing a Business Plan

Structure of the Business Plan

To make the best impression a business plan should follow a conventional structure, such as the outline for the business plan shown in the chapter.

Typically, investors are busy people and want a plan where they can easily find critical information.

Along with facts and figures, a business plan needs to project a sense of readiness (keenness) about the possibilities that surround a new venture.

Content of the Business Plan

The business plan should give clear and concise (short, brief) information on all the important aspects of the proposed venture.

It must be long enough to provide sufficient information yet short enough to maintain reader interest.

For most plans, 25 to 35 pages are sufficient.

Recognizing the Elements of the Plan May Change

It’s important to recognize that the plan will usually change while

written.

Often new information emerges when an entrepreneur or a team of

entrepreneurs involved in writing the plan and start getting feedback

from others.

A suggested outline of a business plan is shown. Most business plans do not include all the elements introduced in the following sample plan; we include them here for the purpose of completeness.

Each entrepreneur must decide which elements to include in his or her plan.

Elements of a Business Plan

Section 1: Executive Summary

The executive summary is a short overview of the entire business plan

It provides a busy reader with everything that needs to be known about the new venture’s distinctive (unique) nature.

An executive summary shouldn’t exceed two single -space pages.

Note : In many instances an investor will ask for a copy of a firm’s executive summary and will ask for a copy of the entire plan only if the executive summary is sufficiently convincing.

OUTLINE OF A BUSINESS PLAN

Section 2: Company Description

The main body of the business plan beings with a general description

of the company.

Items to include in this section:

Company description.

Company history.

Mission statement.

Products and services.

Current status.

Legal status and ownership.

Key partnerships (if any).

Note: It demonstrates to your reader that you know how to

translate an idea into a business

Section 3: Industry Analysis

This section should begin by describing the industry the business will

enter in terms of its size, growth rate, and sales projections.

Items to include in this section:

Industry size, growth rate, and sales projections.

Industry trends.

Long-term prospects.

Note: Before a business selects a target market it should have

an idea of its industry— including where its opportunities are

and where its points of vulnerability are.

Section 4: Market Analysis

The market analysis breaks the industry into segments and focus on the specific segment (or target market) to which the firm will try to satisfy.

Items to include in this section:

Market segmentation and target market selection.

Buyer behavior (customer needs).

Competitor analysis.

Note: Most new ventures do not service their entire industry. Instead, they focus on servicing a specific (target) market within the industry.

Section 5: Marketing Plan

The marketing plan focuses on how the business will market and sell its product or service.

Items to include in this section:

Overall marketing strategy.

Product, price, promotions, and distribution.

Section 6: Management Team and Company Structure

The management team of a new venture typically consists of the

founder or founders and a handful of key management personnel.

Items to include in this section:

Management team.

Board of directors (If required).

Company structure.

Note: Many investors and others who read the business plan

look first at the executive summary and then go directly to the

management team section to assess the strength of the

people starting the firm.

Section 7: Operations Plan

Outlines how your business will be run and how your product or

service will be produced.

A useful way to illustrate how your business will be run is to describe

it in terms of “back stage” (unseen to the customer) and “front stage”

(seen by the customer) activities.

Items to include in this section:

General approach to operations.

Business location.

Facilities and equipment.

Note: It is best to keep this section short and crisp.

Section 8: Product (or Service) Design and Development Plan

If you’re developing a completely new product or service, you need to

include a section that focuses on the status of your development

efforts.

Items to include in this section:

Development status and tasks.

Challenges and risks.

Intellectual property.

Note: Many good ventures are not successful as their product

development efforts turn out to be more dif ficult than

expected.

Section 9: Financial Projections

The final section of a business plan presents a firm ’s projected (or

pro forma) financial projections.

Items to include in this section:

Sources and uses of funds statement.

Assumptions sheet.

Pro forma (model, projected) income statements.

Pro forma balance sheets.

Pro forma cash flows.

Note: Financial projections express the business plan in

financial terms.