MNB1501-LESSON 3
Small business-an independently owned and operated business entity, including
co-operatives and NGOs, that is managed by one or more owners.
Business idea-a concept that identifies a product or service aimed at fulfilling a
specific customer need, often derived from personal experience, industry exposure,
or market research.
Location factors:
• sources of raw material
• availability of labour
• the proximity of and access to the market
• availability and cost of transport facilities
• availability and costs of power and water
• availability and costs of a site and buildings
• availability of capital, attitude, regulations and tariffs of local authorities
• the existing business environment, the social environment, climate, central
government policy and personal preferences
Advantages associated with a small business:
Passion – Small businesses are more adaptable and open to new ideas, leading
to greater innovation.
Customer Relations – They have a better understanding of customer needs,
allowing for personalized service.
Agility – Small businesses can quickly adjust to market changes and trends.
Risk-Taking – Owners are often willing to take risks to grow their businesses.
Efficient Use of Resources – With limited resources, small businesses develop
cost-effective and creative solutions.
Information Sharing – A small business is more likely to have a closer social
network for sharing ideas due to its small size.
, Types of small business failures:
• The owner dies and the business ceases to operate.
• The opportunity cost becomes high. This occurs when the owner realises that
the business is generating less profit compared to other options elsewhere to
encourage him/her for the effort that is being put into it.
• A business loses money, resulting in it being terminated to avoid losses to its
creditors.
• The business becomes bankrupt.
Reasons why small businesses fail:
Managerial inadequacy Financial inadequacy External factors
• Failure in planning • Cash-flow • Economic
(initial start-up plan problems recession
and subsequent • Insufficient first • Increasing
plans) capitalisation unemployment
• Inexperience with • Inadequate • Higher interest
managing business financial records rates
operation • Overlooking the • Lack of desirability
• Ineffective staffing insights of qualified for the product or
• Poor accountants service
communication • Inadequate capital • Inability to compete
skills acquisition with imports
• Failure to seek or strategies • Fraud in the
respond to criticism • Overlooking business
• Failure to learn financial issues • Natural disasters
from past mistakes resulting from
• Overlooking the growth
needs of
customers
• Overlooking
competition
• Failure to diversify
customer base
• Failure to innovate
• Ineffective
marketing
strategies
Different forms of ownership that are found in South Africa:
Sole proprietorship- a business that is established, operated, owned and frequently
funded by one person.
Characteristics:
Small business-an independently owned and operated business entity, including
co-operatives and NGOs, that is managed by one or more owners.
Business idea-a concept that identifies a product or service aimed at fulfilling a
specific customer need, often derived from personal experience, industry exposure,
or market research.
Location factors:
• sources of raw material
• availability of labour
• the proximity of and access to the market
• availability and cost of transport facilities
• availability and costs of power and water
• availability and costs of a site and buildings
• availability of capital, attitude, regulations and tariffs of local authorities
• the existing business environment, the social environment, climate, central
government policy and personal preferences
Advantages associated with a small business:
Passion – Small businesses are more adaptable and open to new ideas, leading
to greater innovation.
Customer Relations – They have a better understanding of customer needs,
allowing for personalized service.
Agility – Small businesses can quickly adjust to market changes and trends.
Risk-Taking – Owners are often willing to take risks to grow their businesses.
Efficient Use of Resources – With limited resources, small businesses develop
cost-effective and creative solutions.
Information Sharing – A small business is more likely to have a closer social
network for sharing ideas due to its small size.
, Types of small business failures:
• The owner dies and the business ceases to operate.
• The opportunity cost becomes high. This occurs when the owner realises that
the business is generating less profit compared to other options elsewhere to
encourage him/her for the effort that is being put into it.
• A business loses money, resulting in it being terminated to avoid losses to its
creditors.
• The business becomes bankrupt.
Reasons why small businesses fail:
Managerial inadequacy Financial inadequacy External factors
• Failure in planning • Cash-flow • Economic
(initial start-up plan problems recession
and subsequent • Insufficient first • Increasing
plans) capitalisation unemployment
• Inexperience with • Inadequate • Higher interest
managing business financial records rates
operation • Overlooking the • Lack of desirability
• Ineffective staffing insights of qualified for the product or
• Poor accountants service
communication • Inadequate capital • Inability to compete
skills acquisition with imports
• Failure to seek or strategies • Fraud in the
respond to criticism • Overlooking business
• Failure to learn financial issues • Natural disasters
from past mistakes resulting from
• Overlooking the growth
needs of
customers
• Overlooking
competition
• Failure to diversify
customer base
• Failure to innovate
• Ineffective
marketing
strategies
Different forms of ownership that are found in South Africa:
Sole proprietorship- a business that is established, operated, owned and frequently
funded by one person.
Characteristics:
