CHAPTER 2:

The Nature of Small Business

OUTLINE
SMALL BUSINESS DEFINITION
TYPES OF SMALL BUSINESS
CHARACTERISTICS OF SMALL BUSINESS
IMPORTANCE OF SMALL BUSINESS IN THE ECONOMY
BENEFITS OF SMALL BUSINESS OPERATORS
ADVANTAGES AND DISADVANTAGES OF SMALL BUSINESS

What is a Small Business

According to Market-share

Small business is one which is independently owned and

operated, and which is not dominant in its field of operations.
The total sales of a business firm is less than 1% of the total
demand for its products

According to Total assets

Small business is one having total assets that fall within a

certain bracket.

R.A.6977 assets valued at P1.5M 15M

Preferred by government because it simplifies formulation and

implementation of policy
Disadvantage: affected by inflation

Types of Small Business

1.
2.
3.
4.
5.

Manufacturing
Service
Wholesaling
Retailing
General construction firms

1. Small Manufacturing Business

Involved in the conversion of raw materials into

products needed by society.

Examples

Bakeries
Tricycle sidecar assembly shops
Bagoong manufacturers

2. Small Service Business

Small businesses that provide service in one way or another
Types of Small Service businesses

Business Services those that provide services to other business such

as accounting firms, security agencies, ad agencies
Personal services- those that provide service to another person such as
tutoring, massage parlors
Repair services those that provide repair service to owners of various
machinery and appliances such as watch repair, auto repair
Entertainment and Recreation includes movie houses, resorts,
billiard, pool, centers
Hotels and motels
Education services

3. Wholesaling
The activities of persons or establishments which sell

to retailers, and other merchants, and/or industrial,

institutional, and commercial users BUT who do not
sell in large amounts to final consumers.
Examples:

Dealers of supplies and office equipment

Grains wholesalers

4. Retailing
Covers all activities involved in the sale of goods

and/or services to the final consumers.

Examples

Retail drug stores

Fast food shops
Appliance stores

5. General Construction Firms

General construction forms are those engaged in the

construction of building whether for private

individuals or firms, or for the government

CHARACTERISTICS OF SMALL BUSINESS

Independent management the owner is also the
manager
2. Small capital requirement Small business
requires only small capital and this can be supplied
by single or few individuals
3. Mostly local operations certain locality
1.

ECONOMIC IMPORTANCE OF
SMALL BUSINESS

1.
2.
3.
4.
5.
6.

Provides economic opportunities to entrepreneurs

Providers of products and services to consumers
Suppliers of products and services to other
businesses
Distributors of products and services of other
businesses
Supporters of government
Providers of employment

ADVANTAGES OF SMALL BUSINESS

Be an employee
2. Be a professional
3. Be a small business operator
1.

BENEFITS OF
SMALL BUSINESS OPERATOR

The opportunity to gain control over his own destiny

The opportunity to reach his full potential
The opportunity to reap unlimited profits
The opportunity to make a contribution to the

society and receive recognition for his efforts.

DISADVANTAGES OF OPERATING
A SMALL BUSINESS

1.
2.
3.
4.
5.
6.
7.

Uncertainty of Income
Risk of losing your entire capital investment
Lower quality of life until the business gets
established
Complete responsibility
Having to serve undesirable customers
Paperworks and other chores
Long hours and demanding work condition

End of Presentation

SEATWORK
-5 types of small business

1.
1.
2.
3.
4.
5.

68
6.
7.
8.

Manufacturing
Service
Wholesaling
Retailing
General construction firms

3 characteristics of small business

independent management
Small capital requirement
Mostly local operations

9-10 2 advantages of small business

9.
10.
11.

Be an employee
Be a professional
Be a small business operator