Problems of Small Business

a) Risk of failure: small businesses have high risk of failure. The reasons are:
i. Lack of homework
ii. Financial loss
iii.
Economic downturn
b) Inadequate management:
i. Poor management skill
ii. Poor business knowledge
iii.
Inadequate planning and inexperience
c) Problems of marketing:
i. Large firms may enter the market of small firms
ii. Inability to face the competition
d) Laws and regulations:
i. Lots of paper work required
ii. They are burdensome and complex for small scale businesses
e) Problem of under utilization of capacity:
i. Unorganized nature of operation
ii. Irregular supply of raw material
f) Poor financial management:
i. Inadequate availability of credit facility
ii. Inadequate capital
iii.
Weak accounting record keeping

Differences between large and small business

s.no. Parameters
1.
Investment

Small
Up to Rs. 30 million

Large
Above Rs. 100 million

2.

No. of workers

Less no. of workers

Higher no. of workers

3.

Production

Low production

Production is high

4.

Technology

Simple technology

High technology

5.

Ownership

6.

Management

Sole trading form of Company

form
of
ownership
ownership with many
shareholders
Inadequate management
Systematic management

7.

Flexibility

8.

Customer relationship

More
flexible to Less flexible to changing
changing markets
markets
Close
relation with Distance relation with
customers
customers