CHAPTER 9

SMALL BUSINESS AND ENTREPRENUERSHIP

Meaning
A business which operates on a small scale with less capital, lesser number of
employees and machines is called a small business.

Types of small business

Enterprises are classified into two major categories :
1. Manufacturing and
2. Services
1.Manufacturing
In the case of enterprises engaged in the manufacture or production of goods,
there are three types of enterprises :
1. Micro enterprise : These are the units whose investment in plant and
machinery does not exceed twenty-five lakh rupees.
2. Small enterprise : These are the units whose investment in plant and
machinery is more than twenty five lakh rupees but does not exceed five crore
rupees.
3. Medium enterprise : These are the units whose investment in plant and
machinery is more than five crore rupees but does not exceed ten crores
rupees.
2.Services
In the case of enterprises engaged in providing services, there are three types of
enterprises :
1. Micro enterprise : These are those units whose investment in equipment does
not exceed ten lakh rupees.
2. Small enterprise : These are those units whose investment in equipment is
more than ten lakh rupees but does not exceed two crore rupees.
3. Medium enterprise : These are those units whose investment in equipment is
more than two crore rupees but does not exceed five crore rupees.

Village Industries
Village industry has been defined as any industry located in a rural area which
produces any goods, renders any service with or without the use of power. The fixed
capital investment per head or artisan or worker is specified by the central
government, from time to time.

XI Business Studies Chapter 9 – Small business and Entreprenuership Page No.1

No.1
 Cottage Industries
Cottage industries have the following features :
1. These are organised by individuals, with private resources.
2. They use family labour and locally available talent.
3. The equipment used is simple.
4. Capital investment is small.
5. They produce simple products.
6. Production of goods using indigenous technology.

Role of Small Business in India

The following points highlight the role of small business in India :
1. The contribution of small industries to the balanced regional development of
our country is noteworthy.
2. Small industries generate more number of employment opportunities per unit of
capital invested compared to large industries.
3. Small industries in our country supply an enormous variety of products which
include ready made garments, stationery items, soaps and detergents etc.
4. Small industries which produce simple products using simple technologies and
depend on locally available resources can be set up anywhere in the country.
5. Small industries provide ample opportunity for entrepreneurship.
6. Small industries also enjoy the advantage of low cost of production.
7. Due to the small size of the organisations, they can take quick and timely
decisions.

Role of small business in Rural India

1. Cottage and rural industries play an important role in providing employment
opportunities in the rural areas.
2. Development of rural and village industries prevent migration of rural population to
urban areas in search of employment.
3. It is a powerful instrument for realising the twin objectives of ‘accelerated industrial
growth and creating additional productive employment potential in rural and backward
areas.’
4. These industries reduce income inequalities, dispersed development of industries
etc.

XI Business Studies Chapter 9 – Small business and Entreprenuership Page No.2

No.2
Problems of Small Business
In general the small businesses are faced with the following problems :

1. Finance : One of the severe problems faced by SSIs is that of non-availability of

adequate finance to carry out its operations.

2. Raw materials : Another major problem of small business is the procurement of

raw materials.

3. Managerial skills : Small business is generally promoted and operated by a single

person, who may not possess all the managerial skills required to run the business.

4. Labour : Because of lower remuneration offered, attracting talented people is a

major problem in small business organisations.

5. Marketing : In most cases, marketing is a weaker area of small organisations.

6. Quality : Small business units do not have adequate resources to invest in quality
research and maintain the standards of the industry.

7. Capacity utilisation : Due to lack of marketing skills, many small business firms
have to operate below full capacity.

8. Technology : Use of outdated technology is often stated as serious problem in the

case of small industries.

9. Sickness : Prevalence of sickness in small industries has become a point of worry

to both the policy makers and the entrepreneurs.

10. Global competition : Small business also fears about the present context of
liberalisation, privatisation and globalisation (LPG) polices which results in global
competition.

Government assistance to small business units

Some of the support measures and programmes meant for the promotion of small
and rural industries are :

1. National Bank for Agriculture and Rural Development (NABARD) : It was set
up in 1982 to promote integrated rural development. Apart from agriculture it
supports small industries, cottage and village industries, and rural artisans using
credit and non-credit approaches.

2. The Rural Small Business Development Centre (RSBDC) : The Rural Small
Business Development Centre is sponsored by NABARD. It works for the benefit of
socially and economically disadvantaged individuals and groups.

XI Business Studies Chapter 9 – Small business and Entreprenuership Page No.3

No.3
3. National Small Industries Corporation (NSIC) : National Small Industries
Corporation was set up in 1955 with a view to promote, aid and foster the growth of
small business units in the country.

4. Rural and Women Entrepreneurship Development (RWED) : The Rural and

Women Entrepreneurship Development Programme aims at promoting a conducive
business environment to encourage and support the entrepreneurial initiatives of rural
people and women.

5. Scheme of Fund for Regeneration of Traditional Industries (SFURTI) : This was

set up in the year 2005 to facilitate traditional industries more productive and
competitive and to facilitate their sustainable development.

6. The District Industries Centres (DIC’s) : The District Industries Centre was
launched on 1st May 1978, with a view to providing an integrated administrative
framework at the district level.

Entrepreneurship Development
Entrepreneurship is the process of setting up one’s own business. The person who
set-up his business is called an entrepreneur.
Characteristics of Entrepreneurship
The following are the characteristics of entrepreneurship :
1.Systematic Activity : Entrepreneurship is a systematic, step-by-step and
purposeful activity.
2.Lawful and Purposeful and activity : The object of entrepreneurship is lawful
business. Purpose of entrepreneurship is creation of value for personal profit and
social gain.
3.Innovation : It involves innovation-introduction of new products, discovery of new
markets etc.
4.Organisation of Production : Entrepreneur, in response to a perceived business
opportunity mobilises various resources of production into a a productive enterprise
or firm.
5.Risk-taking : It is generally believed that entrepreneurs take high risks.

STARTUP INDIA SCHEME

The Startup India Scheme is a flagship initiative of the Government of India. This
drive will lead towards sustainable economic growth and generate large-scale
employment opportunities. The scheme specifically aims to :

XI Business Studies Chapter 9 – Small business and Entreprenuership Page No.4

No.4
1. Trigger an entrepreneurial culture and inculcate entrepreneurial values in the society.
2. Create awareness about the charms of being an entrepreneur and the process of
entrepreneurship, especially among the youth.
3. Encourage more dynamic startups by motivating the educated youth, scientists and
technologists.
4. Support the early phase of entrepreneurship development.
5. Broad base the entrepreneurial supply by meeting specific needs of under
represented target groups, like women, socially and economically backward
communities, scheduled castes and scheduled tribes etc.

Startup India : Action Points

1. Simplification and hand-holding : In order to make compliance for startups, friendly
and flexible, simplifications are announced.
2. Startup India Hub : The objective is to create a single point of contact for the entire
startup ecosystem.
3. Legal support and fast tracking Patent Examination : It facilitates protection of
patents, trademarks and designs of innovative and interested startups.
4. Easy exit : In the event of a business failure and wind up of operations, procedures
are adopted to reallocate capital and resources towards more productive avenues.
5. Tax exemption : The profits of startup initiatives are exempted for income tax for a
period of three years.

Ways to fund startup

In addition to the government plans that offer startup capital and bank loans, the
funding for startups can also be availed in the following ways :
1. Boot strapping : Commonly known as self financing. It is considered as the first
funding option because here the entrepreneur uses his own personal savings and
resources.
2. Crowdfunding : It is the pooling of resources by a group of people for a common
goal.
3. Angel investment : Angel investors are individuals with surplus cash who have keen
interest to invest in upcoming startups.
4. Venture capital : There are professionally managed funds which are invested in
companies that have huge potential.

XI Business Studies Chapter 9 – Small business and Entreprenuership Page No.5

No.5
5. Microfinance and NFBC’s : Micro finance is basically access to financial services to
those who either do not have access to conventional banking services or have not
qualified for a bank loan. Similarly, NBFC’s(Non Banking Financial Corporation)
provides banking services without meeting legal requirement/definition of a bank.

Intellectual Property Rights (IPR)

Intellectual Property(IP) refers to products of human mind. Hence, just like other
types of property, the owners of IP can rent, give or sell it to other people. The most
noticeable difference difference between intellectual property and other forms of
property is that intellectual property is intangible.

Prepared by
SREEKUMAR P.R
HSST Commerce
T.D.H.S.S, Thuravoor
Alappuzha District
Mobile : 9400561551, 6282524735
Published on 15.04.2022

XI Business Studies Chapter 9 – Small business and Entreprenuership Page No.6

No.6