What is a Small Business?
After working overseas for 10 years, Orly Villa decided to start a business of breeding ornamental plants in September 2004. He bought the 500 square meter lot adjacent to his house in Los Banos in Laguna province, south of Manila. The garden is one of four gardens that lie along the stretch of the highway. A small signboard, “Ricky’s Garden,” stands directly in front. Three men help him prepare the soil, plant, transfer seedlings, water the plants, and do other garden maintenance tasks. Part of their job includes putting up trellises when needed, keeping the bags of fertilizer, garden soil, sawdust, compost, and other materials, taking care of the tools, and assisting buyers.
Orly holds office inside a bahay kubo that stands in the middle of the garden. A permit from the town mayor hangs in one of the walls. He uses notebooks to list down the money that come in from buyers and the money that he spends for the seedlings, fertilizers, plastic bags, and other materials, including the salaries of the three helpers.
We can see from the illustration that Orly is a small businessman. Being the owner of the business, he alone decided, and continues to decide for the business. It was he who thought of putting up the business; chose the type of business ornamental plant breeding and form single proprietorship (organization aspect); amount of money to put in and keep notebooks (financial aspect); system of breeding the plants and maintaining the garden, including choosing suppliers of the materials, number of sacks to keep in stock, tools and equipment to use, etc. (production or technical aspect); where to set up the business, how to attract buyers, how much he will charge, etc. (marketing aspect); and whom to hire, what they do, their number, and their pay (organization aspect).
Some Definitions
Broadly speaking, a small business is one wherein most functions of a business enterprise production, marketing, finance, and management are essentially organized around the owner-manager who makes most of the major decisions and runs the day-to-day affairs of the enterprise. The small business owner has very few or no specialized staff or managers helping him in marketing, production, finance, and personnel management decisions. Rather, he tries to do most of these tasks himself.
There are other characteristics commonly associated with a small business. These are:
1 single proprietorships and family-based operation,
2 single product line or very limited product range, usually light consumer products (for
example, food, beverage, and clothing),
3 small-volume production,
4 limited markets, usually local,
5 labor-intensive production methods,
6 few employees, other than family members, many on part-time basis,
7 “patriarchal” management style where employees are often treated as extended family
members,
8 low level use of technology, and
9 marginal capital assets, mainly sourced from the owner-manager’s savings and those
of the immediate household members.
The government defines a small business based on how much the business owns (asset size) and the number of people that work for it (employment) for purposes of rationalizing assistance and incentives to business enterprises.
In terms of asset size, a small enterprise has capital assets between P3 million to P15 million. In terms of employment, a small business employs from 10 to 99 workers. Below the level of asset size and employment mentioned, you have a micro enterprise. Above such level, you have a medium or large-scale business.
Generally speaking, however, micro, small and medium-scale businesses are categorized as small. Some micro enterprises grow into small, then from small into medium, and so on. This is one of the reasons why the government has made distinctions among them so that its support services and incentives can be focused according to the needs of enterprises, which apparently tend to differ depending on the size category of the business (You will know more about these government services towards the end of this chapter).
Just like any other business, small businesses are found in manufacturing (for example, food processing or garment making), services (auto repair or internet café), agribusiness (farming or fishing), or trading (grocery store, buy-and-sell).
Orly holds office inside a bahay kubo that stands in the middle of the garden. A permit from the town mayor hangs in one of the walls. He uses notebooks to list down the money that come in from buyers and the money that he spends for the seedlings, fertilizers, plastic bags, and other materials, including the salaries of the three helpers.
We can see from the illustration that Orly is a small businessman. Being the owner of the business, he alone decided, and continues to decide for the business. It was he who thought of putting up the business; chose the type of business ornamental plant breeding and form single proprietorship (organization aspect); amount of money to put in and keep notebooks (financial aspect); system of breeding the plants and maintaining the garden, including choosing suppliers of the materials, number of sacks to keep in stock, tools and equipment to use, etc. (production or technical aspect); where to set up the business, how to attract buyers, how much he will charge, etc. (marketing aspect); and whom to hire, what they do, their number, and their pay (organization aspect).
Some Definitions
Broadly speaking, a small business is one wherein most functions of a business enterprise production, marketing, finance, and management are essentially organized around the owner-manager who makes most of the major decisions and runs the day-to-day affairs of the enterprise. The small business owner has very few or no specialized staff or managers helping him in marketing, production, finance, and personnel management decisions. Rather, he tries to do most of these tasks himself.
There are other characteristics commonly associated with a small business. These are:
1 single proprietorships and family-based operation,
2 single product line or very limited product range, usually light consumer products (for
example, food, beverage, and clothing),
3 small-volume production,
4 limited markets, usually local,
5 labor-intensive production methods,
6 few employees, other than family members, many on part-time basis,
7 “patriarchal” management style where employees are often treated as extended family
members,
8 low level use of technology, and
9 marginal capital assets, mainly sourced from the owner-manager’s savings and those
of the immediate household members.
The government defines a small business based on how much the business owns (asset size) and the number of people that work for it (employment) for purposes of rationalizing assistance and incentives to business enterprises.
In terms of asset size, a small enterprise has capital assets between P3 million to P15 million. In terms of employment, a small business employs from 10 to 99 workers. Below the level of asset size and employment mentioned, you have a micro enterprise. Above such level, you have a medium or large-scale business.
Generally speaking, however, micro, small and medium-scale businesses are categorized as small. Some micro enterprises grow into small, then from small into medium, and so on. This is one of the reasons why the government has made distinctions among them so that its support services and incentives can be focused according to the needs of enterprises, which apparently tend to differ depending on the size category of the business (You will know more about these government services towards the end of this chapter).
Just like any other business, small businesses are found in manufacturing (for example, food processing or garment making), services (auto repair or internet café), agribusiness (farming or fishing), or trading (grocery store, buy-and-sell).
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