Introduction:
An enterprise is an undertaking, especially one of some
scope, complication and risk. It is a business organisation, which is
undertaken, something attempted to be performed a projected which
involves activity, courage, energy and the like. A business which is
running in a small level with less capital is termed as small scale
enterprises. A Small scale enterprises plays a significant role in the
development of the economy, it contributed significantly to the national
income and provides employment opportunities to the large number of
people in rural economy. Capital shortage is the most important problem
faced by Indian Economy in introducing latest technology, other than
this there are many other problems faced by them.
Problems of Women Entrepreneurs in India:
- Low-level risk taking attitude is another factor affecting women
folk decision to get into business. Though the risk tolerance ability
of the women folk in day-to-day life is high compared to male members,
while in business it is found opposite to that
- The confidence to travel across day and night and even
different regions and states are less found in women compared to male
entrepreneurs. This shows the low level freedom of expression and
freedom of mobility of the women entrepreneurs.
- The interest of the family members is a determinant factor in the realization of women folk business aspirations.
- The financial institutions discourage women entrepreneurs
on the belief that they can at any time leave their business and become
housewives again. The result is that they are forced to rely on their
own savings, and loan from relatives and family friends.
Problems faced by small scale businesses:
Small businesses often face a variety of
problems related to their size. A frequent cause of bankruptcy is
undercapitalization. This is often a result of poor planning rather than
economic conditions. Small businesses face a number of challenges. From
the startup phase to maintaining the business to growing the business,
entrepreneurs need to constantly face a number of challenges, some of
which are unique to small businesses. Foremost of course of these
challenges is ensuring that the business survives.
Challenges faced by a small scale entrepreneur: A Case Analysis:
Small – scale industries in India could
not progress satisfactorily due to various problems that they are
confronted with while running enterprises. In spite of having huge
potentials, the major problems, small scale industries faced are:
1. Problem of skilled manpower:
The success of a small enterprise resolves around the
entrepreneur and its employees, provided the employees are skilled and
efficient. Because of inefficient human factor and unskilled manpower
create innumerable problems for the survival of small industries. Non-
availability of adequate skilled manpower in the rural sector poses
problem to small – scale industries.
2. Inadequate credit assistance:
Adequate and timely supply of credit
facilities is an important problem faced by small – scale industries.
This is partly due to scarcity of capital and partly due to weak
creditworthiness of the small units in the country.
3. Irregular supply of raw materials:
Small units face severe problems in
procuring the raw materials whether they use locally available raw
materials or imported raw materials. The problems arise due to faulty
and irregular supply of raw materials. Non- availability of sufficient
quantity of raw materials, sometimes poor quality of raw materials, and
increased cost of raw materials, foreign exchange crisis and above all
lack of knowledge of entrepreneurs regarding government policy are other
few hindrances for small – scale sector.
4. Absence of organized marketing:
Another problem faced by small – scale units
is the absence of organised marketing system. In the absence of
organised marketing, their products compare unfavourably with the
quality of the product of large scale units. They also fail to get
adequate information about consumer's choice, taste and
preferences of the type of product. The above problems do
not allow them to stay in the market.
5. Lack of machinery and equipment:
Small – scale units are striving hard to
employ modern machineries and equipment in their process of production
in order to complete their large industries. Most of the small units
employ outdated and traditional technology and equipment. Lack of
appropriate technology and equipment create a major stumbling block for
the growth of small – scale industries.
6. Absence of adequate infrastructure:
Indian economy is characterized by
inadequate infrastructure which is the major problems for small units to
grow. Most of the small units and industrial estates found in towns and
cities are having one or more problems like lack of power supply, water
and drainage problems, poor roads, raw materials and marketing
problems. Thus absence of adequate infrastructure adversely affects the
quality, quantity and production schedule of the enterprises which
ultimately results in under – utilization of capacity.
7. Competition from large – scale units and imported articles:
Small scale units find it very difficult to compete with
the product of large – scale units and imported articles which are
comparatively very cheap and of better quality than small units'
product.
Other problems faced by the small scale enterprises:
- Small businesses often face a variety of problems related to
their size. A frequent cause of bankruptcy is undercapitalization. This
is often a result of poor planning rather than economic conditions - it
is common rule of thumb that the entrepreneur should have access to a
sum of money at least equal to the projected revenue for the first year
of business in addition to his anticipated expenses. For example, if the
prospective owner thinks that he will generate $100,000 in revenues in
the first year with $150,000 in start-up expenses, then he should have
not less than $250,000 available. Failure to provide this level of
funding for the company could leave the owner liable for all of the
company's debt should he end up in bankruptcy court, under the theory of
undercapitalization.
- In addition to ensuring that the business has enough
capital, the small business owner must also be mindful of contribution
margin (sales minus variable costs). To break even, the business must be
able to reach a level of sales where the contribution margin equals
fixed costs. When they first start out, many small business owners under
price their products to a point where even at their maximum capacity,
it would be impossible to break even. Cost controls or price increases
often resolve this problem.
- In the United States, some of the largest concerns of
small business owners are insurance costs (such as liability and
health), rising energy costs, taxes and taxcompliance. In the United
Kingdom and Australia, small business owners tend to be more concerned
with excessive governmental red tape.
- Another problem for many small businesses is termed the
'Entrepreneurial Myth' or E-Myth. The mythic assumption is that an
expert in a given technical field will also be expert at running that
kind of business. Additional business management skills are needed to
keep a business running smoothly.
- Still another problem for many small businesses is the
capacity of much larger businesses to influence or sometimes determine
their chances for success.
Small business bankruptcy
When small business fails, the owner may file bankruptcy. In
most cases this can be handled through a personal bankruptcy filing.
Corporations can file bankruptcy, but if it is out of business and
valuable corporate assets are likely to be repossessed by secured
creditors there is little advantage to going to the expense of a
corporate bankruptcy. Many states offer exemptions for small business
assets so they can continue to operate during and after personal
bankruptcy. However, corporate assets are normally not exempt; hence it
may be more difficult to continue operating an incorporated business if
the owner files bankruptcy.
Social Responsibility
Small businesses can encounter several problems related to
corporate social responsibility due to characteristics inherent in their
construction. Owners of small businesses often participate heavily in
the day-to-day operations of their companies. This results in a lack of
time for the owner to coordinate socially responsible efforts.
Additionally, a small business owner's expertise often falls outside the
realm of socially responsible practices contributing to a lack of
participation. Small businesses also face a form of peer pressure from
larger forces in their respective industries making it difficult to
oppose and work against industry expectations. Furthermore, small
businesses undergo stress from shareholder expectations. Because small
businesses have more personal relationships with their patrons and local
shareholders they must also be prepared to withstand closer scrutiny if
they want to share in the benefits of committing to socially
responsible practices or not.
Job Quality
While small businesses employ over half the workforce and
have been established as a main driving force behind job creation the
quality of the jobs these businesses create has been called into
question. Small businesses generally employ individuals from the
Secondary labor market. As a result, in the U.S. wages are 49% higher
for employees of large firms. Additionally, many small businesses
struggle or are unable to provide employees with benefits they would be
given at larger firms. Research from the U.S. Small Business
Administration indicates that employees of large firms are 17% more
likely to receive benefits including salary, paid leave, paid holidays,
bonuses, insurance, and retirement plans. Both lower wages and fewer
benefits combine to create a job turnover rate among U.S. small
businesses that is 3 times higher than large firms. Employees of small
businesses also must adapt to the higher failure rate of small firms. In
the U.S. 69% last at least 2 years, but this percentage drops to 51%
for firms reaching 5 years in operation. U.S. Small Business
Administration counts companies with as much as $35.5 million in sales
and 1,500 employees, depending on the industry. Outside government,
companies with less than $7 million in sales and fewer than 500
employees are widely considered small businesses.
Major challenges facing while starting a new small scale business:
1. Developing the Vision and Business Idea
2. Raising Capital for your Startup
3. Assembling a Business Team
4. Finding the Right Business Location
5. Finding Good Employees
6. Finding Good Customers
7. Dealing with Competition
8. Unforeseen Business Challenges and Expenses
9. Keeping Up With Industrial Changes and Trends
10. Exiting the Business
Conclusion:
Besides the above problems,
small – scale units have been of constrained by a number of other
problems also. They include project planning, managerial inadequacies,
old and orthodox designs, high degree of obsolescence and huge number of
bogus concerns. Due to all these problems the development of small –
scale industries could not reach prestigious stage. Small businesses
face a number of challenges. From the startup to maintaining the
business to growing the business, entrepreneurs need to constantly
number of challenges, some of which are unique to small businesses.
Foremost of course these challenges are ensuring that the business
survives.
source:articlesbase.com
