Definition of SME Definitions of SME are typically based on the number of people employed or on sales volume.

Most of the definitions are based on the economic sector in which a business operates. In most industrialized countries small businesses are treated in special ways. They are eligible for financial programs or get favored treatment under the tax laws. For this purpose governments publish official size standards. In Pakistan such definitions are issued by Small & Medium Enterprise Development Authority (SMEDA). SMEDA SME Definition Small & Medium Enterprises are defined as follows, as approved in SME Policy 2007. Enterprise Employment Size Paid Up Capital Annual Sales Category Small & Medium Up to 250 Up to Rs. 25 Up to Rs. 250 Enterprise (SME) Million Million The Federal Government, in line with the economic development of Pakistan may, from time to time modify the eligibility criteria as it sees fit. SME Definitions used by various institutions in Pakistan Institution Small SME Bank Total Assets of Rs. 20 million Federal Bureau of Statistics Punjab Small Industries Corporation Punjab Industries Department Sindh Industries Department State Bank of Pakistan (SME Prudential Regulations) Less than 10 employees Medium Total Assets of Rs. 100 million N/A

Fixed investment. up to Rs. 20 million excluding N/A land and building Fixed assets with Rs. 10 million excluding cost of land Entity engaged in handicrafts or manufacturing of consumer or producer goods with fixed capital investment up to Rs.10 million including land & building An entity, ideally not being a public limited company, which does not employee more than 250 persons (manufacturing) and 50 persons (trade / services) and also fulfills one of the following criteria: i. A trade / services concern with total assets at cost excluding land and buildings up to Rs 50 million. ii. A manufacturing concern with total assets at cost excluding land and building up to Rs 100 million. iii. Any concern (trade, services or manufacturing) with net sales not exceeding Rs 300 million as per latest financial statements.

Small business The Small Business is defined as any business with 100 employees or less, a category that includes more than 98 percent of all U.S. businesses. But everyone has his or her own definition of the small-business owner. Of them these are of particular interest: Webster's Dictionary: A person who organizes and manages a business undertaking, assuming the risk for sake of profit. Peter Drucker: Someone who gets something new done. (The late Peter Drucker is the Father of Modern Management) Clifford Baum: Small business is one that is --Actively managed by its owner --Highly personalized --Largely local in its area of operation --Relatively small in size within the industry and --Largely dependent on the internal resources of capital to finance its growth In USA the small industry was defined as a business qualifies a small if it does not dominate its industry and have less than 100 employees. In the United Kingdom small firms were defined in 1969 as entities having less than 200 employees. It should be run by its owner and should have a relatively small share of its market. In France, it was defined as a company with less than 10 employees, representing over 90 percent of all businesses and employing one sixth of the total work force and they categorized it as follows: I. Less than 10 employees (very small enterprise) II. 10 to 40 employees (small enterprises) III. 50 to 500 employees (medium enterprises). IV. Over 500 employees (large enterprises) In Japan the term smaller enterprises refers to such companies with a capital of not more than five million yen, companies with not more than two hundred personnel regularly employed. In the West Germany, Australia and Norway the definitions were made for the legal purposes and different deciding factors were kept as landmarks. Nowadays, a generalized definition is in practice and it says an SME entity is defined as a business with an investment in productive assets (not including land and building) ranging between rupees 2 to 40 million and employing among 10 to 99 workers. CHARACTERISTICS OF SMALL BUSINESS 1: Privately held small business is again subdivided into two categories. a: Very small where chief worker is the owner like jewelry shops, shoe stores and grocery shops etc. b :The Large Small business where the proprietor mainly directs the work of its employees. 2: No or few management layers 3: Style of management is personalized. The owner has first hand knowledge of every move in the business at all levels he is the main decision maker. 4: Limited resources: a small business is unlikely to have sufficient resources to dominate the market.

5: Independence: The owner has ultimate authority and effective control 6: Scope of operations: Small enterprises serve a limited segment of local or regional market. 7: Scale of operation: They occupy a limited share of given market. 8: Labor: They are low in capital and high in labor, as they cannot afford capital-intensive machinery. 9: Technological innovation: If available small business does well 10: Specialized skills: The small enterprises normally have specialized skills for certain specific clients. The small business does well in small, isolated, overlooked and imperfect market. 11: Small business does well in developing markets as it can easily absorb the changes 12: Small business survives well in a bad business condition due to having quick and clever capability of bringing changes in cost and labor. TYPICAL SMALL BUSINESS 1. RETAILING: Its a traditional business where normally the owner is the boss and owner. 2. SERVICES: Such as legal and accounting, courier services and beauty parlors etc. 3. CONSTRUCTION ACTIVITY. 4. WHOLE SALE BUSINESS. 5. FINANCING, INSURANCE AND REAL ESTATE. 6. TRANSPORTATION COMMUNICATION AND PUBLIC UTILITIES. 7. MANUFACTURING THE HISTORY: Recent years have seen a major revival of small business throughout the developed world. The countries like divided Russia and Eastern Europe are prizing such skills very high. The first piece of writing about the small business discovered was of about more than 4000 years ago. This writing is about loaning from a Bank for a small business with terms and conditions. Since then, the small business people have been the backbone of most economies providing products and services to the consumers. Small business flourished in almost all ancient cultures. The Egyptians, Arabs, Babylonians, Jews, Greeks and Romans contained a substantial population of small business. To protect the customers from corrupt traders, HAMMURABI, the king of Babylon introduced the first business laws. Despite many successes the Greek and Roman historians virtually ignored the role of small business and talked more about the other things. Yet it was largely through small business that the traders by doing business in other countries spread law, religions, and philosophy and basic sciences. When Adam Smith published Wealth of Nations in 1776, he was describing an economy in which local small business was virtually being the only economic entities. In the undivided subcontinent if we look at beginnings of the known history of small business, the cottage industries thrived through the period when society was organized into self sufficient and selfcontained units. The Subcontinent industry whether small or large scale, suffered a serious set back during British rule. Indian industries including small and cottage did not receive any patronage during the period before Second World War. It was, however, since independence that a positive policy for the industrial development could be formulated and implemented. The best model of small industries in our region is considered to be of India. In the year 1938 national

planning committee NPC was set up and its general secretary Mr. K.T. Shah made the definitions of cottage, village and small-scale industries. The various definitions since then are in practice having different variables as human resource, capital, assets value etc. Advantages of Small Businesses

Identifying the Pros and Cons of Owning a Small Business THE REASONS TO OWN We can think of many reasons why people choose to own a business: The satisfaction of creation Have you ever experienced the pride of building a chair, preparing a meal, or repairing a vacuum cleaner? The small-business owner is treated to the thrill of creation on a daily basis, not to mention the satisfaction of solving a customer's problem. Establishment of their own culture A small business owner no more needs to complain about "the way things are around him." After you've started your own business, the way things are around here is a direct function of the way you intend them to be. Financial upside Consider Charles Schwab, Oprah Winfrey, and Steve Jobs. It's no surprise that these one-time small-business owners are among the nation's wealthiest individuals. A recent SBA study concluded definitively that although small-business ownership is risky, small-business owners had a significantly higher probability of being classified as high income and high wealth.

Self-sufficiency For many people, working for someone else has proven to be a less-than-gratifying experience. As a result of such unfulfilling experiences, some people have discovered that if they want to provide for themselves and their families, they'd better create the opportunity themselves. Flexibility Perhaps you prefer to work in the evenings because that's when your spouse works or you want to spend more time with the kids during the day. As a small business owner, despite the long hours you work, you should have more control over keeping a schedule that works best for you. After all, you're the boss, and you can usually tailor your schedule to meet your personal needs, as well as those of your customers. THE REASONS NOT TO OWN Responsibility As a small-business owner, not only does your family depend on your business success, so do your partners, your employees and their families, your customers, and sometimes your vendors. If you're the type of person who sometimes takes on more responsibility than you can handle and works too many hours, beware that another drawback of running your own business is that you may be prone to becoming a workaholic. Competition Although some people thrive on competition, that same competition comes back to haunt you by threatening your security. You soon find out that a host of hungry competitors is pursuing your customers and threatening your livelihood, whether by cutting prices or offering a more complete package of unique services. You should remember that in order to have a competition, someone's going to win and someone's going to lose. Change Products and services come, and products and services go. The pace of change today is significantly faster than it was a generation ago - and it shows no signs of slowing down. If you don't enjoy change and the disorder it causes, then perhaps the stability that a larger, more bureaucratic organization provides is best for you. Chance Interest rates, the economy, theft, fire, natural disasters, sickness, pestilence - the list goes on. Any of these random events can send your business reeling. Red tape Taxes, health-care reform, bureaucracy, tariffs, duties, treaties, NAFTA. You will have to pay all these taxes. Business failure

And finally the owner faces the specter of the ultimate downside: business failure in the form of bankruptcy. This is the stage where the owner stands back and watches the creditors swoop in like vultures to devour his remaining business assets. Now contrast the small-business owner's failure to the Fortune 500 employee who fails, collecting a tidy severance check as he packs up his calculator and wave good-bye on his way to register for unemployment compensation. EXPLORING ALTERNATIVES TO STARTING A BUSINESS Here are several options for to consider, instead of owning a business: Become a better employee Companies of all sizes need good employees, and good companies are willing to go to a lot of trouble and expense to hire, retain, and pay them. Keep improving your work ethics and willingness to put in the extra hours when needed and your accompanying willingness to accept more responsibility will bring a smile to the faces of employers. You don't need a PhD, a master's degree, or even an undergraduate college degree to succeed in business because of the amount of knowledge that you can pick up on your own through mentors, experience, and plenty of reading. Be an entrepreneur inside a larger company If you can find or create an entrepreneurial enterprise inside (or alongside) a larger company, in addition to significant managerial and operational responsibility, in many cases you can also negotiate sharing in the financial success that you help to create. Entrepreneurial opportunities can come from within businesses of all sizes, shapes, and forms. One large company - 3M, a Fortune 500 company - has long taken pride in a corporate culture that allows its employees to take an idea and build it into a separate company within 3M. Developing a business within a business can be a win-win situation for everyone. Buy an existing business In the likely event that you don't have a specific idea for a business you want to start, but you have exhibited business-management skills, consider buying an established business. Although buying someone else's business can, in some cases, be riskier than starting your own, at least you know exactly what you're getting into right from the start. The good news, however, is that you often don't have to waste time and energy creating an infrastructure - it's already in place, which allows you, the buyer, to dive right into the business, without having to waste time on the peripherals. Invest in someone else's business If you find that managing the day-to-day headaches of a small business is not for you, perhaps a viable alternative would be to consider investing in someone else's small business - assuming that you have the ability to identify potentially successful businesses.