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UCU 104




Entrepreneurial ventures Vs. Small Businesses

Small businesses are fewer than 500 (USA) but in Kenya they are
about 50

They are found in both the formal and informal sectors

The growing global concern of stagnation, decline in economic

growth, chronic unemployment and social problems lead to
increased search for strategies to stimulate economic activity

Small businesses have been found to have a higher potential for job
generation because of a lower cost per job created.

Small businesses are defined (mean differently) to different people. Below

are the yardsticks (indicators) that are used by different personalities:

Financers e.g. banks and NGOs define a small business in terms

of fixed asset/networking (overall value of business).


Labour officers and policy members of government use the criteria

of the total number of persons employed.


Traders and marketers use a selling limit of sales volume


Manufacturers use the criteria of technology used in product or

maximum level of energy required.


Service personnel may use the total number of customers being



Managers may use the degrees of management satisfaction.

In most places, the above indicators are used in combination,

however the criteria is not mutually exclusive e.g. a business may
use high technology but yet has very few employees say 3 only.

Generally, most small businesses involve business in formal and

informal sectors and they include family undertakings, sole-traders,
partnerships, companies etc.

Introduction to Entrepreneurship

UCU 104




to National

Development and

general society

Economic Roles (Contributions)

Small businesses are labor intensive and more people are needed









organizations (they are flexible, adoptable and able to create


They employ workers with limited skills who learn on the job.

They spark new ideas and develop products and services that
create new enterprises.

Basic for developing a pool of skilled and semi-skilled workers for

future industrial expansion.

Improves forward and backward linkage between economically,

socially and geographically diverse sectors.

Provide opportunities for developing and adopting appropriate

technologies and managerial approaches.

Increases mobility for the improved development of natural

resources and contribute to increased participation in economic


Social roles (contributions)

Enables one to move from one class to another.

Contributes to even distribution of resources leading to reduction in



Enables integration and interaction of communities due to trade.

Political roles (Contributions)

Have potential for democratization (expansion of sector)

Increasing the number and spreading throughout the society results

into a new constituency of owner and employees.

Introduction to Entrepreneurship

UCU 104


Provide a base for a balanced rule between the rural areas and the
rest of the society and the government.

Note: Political SMEs provide balanced development.


Entrepreneurship development success factors

How to tell that entrepreneurship is succeeding in the society

Number of new businesses started/ coming up

Growth of the existing ones

Improvement in quality of products and services

Number of people buying/using new products or services

Newer and better ideas in the market place

New market people who are not using a particular good or product
and now they can use it

Demand for business development services e.g. Micro-financing,

training and


High awareness of entrepreneurship in schools.

Characteristics of Small Business

1. Family owned
2. Labour intensive
3. Flexibility and adaptability
4. Easy to start easy to exists
5. Smallness/simple slender structures
6. Easy in making decision
7. Use semi-skilled workers (a pool of learning) and moving down they
have short learning horizon.eg. These strategic plans have 5-20 years
8. Are located within the community
9. Very low survival rate if they have low mortality rate

Introduction to Entrepreneurship

UCU 104


Distinguishing between small business & entrepreneurship

Small business

Entrepreneurship business


Survival oriented


They operate on limited


Growth oriented (they expand, diversify)


Have access to resources

limited resources

Labour intensive


Family based/managed (iv)

Professionally managed


They are resource based


Not resource based


Follow imitative patterns


Are highly innovative


They are profit oriented (vii)

Sales oriented

(viii) Low risk ventures



Capital intensive (use some form of technology)

(viii) They take moderate calculated risks

Take minimum wealth for


Tend to grow fast and get wealth rapidly.

the owner

Introduction to Entrepreneurship