Lesson 6: Operating Small Business Ideation

• Two approaches of small business

  1. Market share approach
  2. Total Assets Approach
• Market Share Approach


  may be defined as one which is independently owned and operated and which is not dominant in its field of operation. The term “not dominant” indicates that a small business does not control a sizeable share of the market. When the total sales of a business firm is less than one percent of the total demand for its product, the firm may be considered small business
• Total Assets Approach


  The Magna Carta for Small Enterprise (R.A. 6977) defines small and medium enterprise as any business activity or enterprise engaged in industry, agribusiness, and/or services, whether single proprietorship, cooperative, partnership or corporation whose total asset are inclusive of those arising from loan, but exclusive of the land on which the particular business entity’s office , plant, and equipment are situated must have value under the following categories
• Micro


  less than - PhP 50,000
• Cottage


  PhP 50,001 – PhP 500,000
• Small


  PhP 500,001 - PhP 5,000,000
• Medium


  PhP 5,000,001 - PhP 20,000.000
• Characteristics of a Small Business

  1. Independent Management – The owner is also the manager. He is the boss.
  2. Small capital requirement - Small business requires only small capital and this can be provided by a single or few individuals.
  3. Mostly local operation – Small business usually operates in certain locality although there are cases when the market is not confined to a local area
  4. Serves the “niche” market – untapped or unserved market is normally served well by small businesses.
• Advantages of Operating a small business

  • Opportunities to Gain Control Over His Own Destiny
  • Opportunity to Reach Full Potential
  • Opportunity to Reap Unlimited Profits
  • Opportunity to Make a Contribution to Society and Receive Recognition for His Efforts.
• Disadvantages of operating a small business

  • Uncertain of income
  • Risk of losing your entire capital investment
  • Lower quality of life until the business gets established
  • Complete responsibility
  • Long hours and demanding work condition