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It is rightly said that we need to give special attention for the growth of rural, backward and hilly areas because:

• Large scale business houses are unwilling to invest in these areas. It leads to lack of employment opportunities in these areas.
• There is disguised and seasonal unemployment in rural areas. This type of unemployment can best be tackled by developing small scale and village industries.
• It is the duty of the government to ensure balanced development in all corners of the country.
• It can help to make these areas developed and bring them at par with other areas of the country.

Small Scale Industry (SSI) is an industrial undertaking in which the investment in fixed assets in plant and machinery, whether held on ownership term or on lease or hire purchase, does not exceed Rs 1 crore. However, this investment limit is varied by the Government from time to time. 

Entrepreneurs in small scale sector are normally not required to obtain a license either from the Central Government or the State Government for setting up units in any part of the country. Registration of a small scale unit is also not compulsory. But its registration with the State Directorate or Commissioner of Industries or DIC’s makes the unit eligible for availing different types of Government assistance like financial assistance from the Department of Industries, medium and long term loans from State Financial Corporations and other Commercial Banks, machinery on hire- purchase basis from the National Small Industries Corporation,etc. Registration is also an essential requirement for getting benefits of special schemes for promotion of SSI viz. Credit Guarantee Scheme, Capital subsidy, Reduced custom duty on selected items, ISO-9000 Certification reimbursement and several other benefits provided by the state government.

1. The Ministry of Micro, Small and Medium Enterprises acts as the nodal agency for growth and development of SSIs in the country. The ministry formulates and implements policies and programmes in order to promote small scale industries and enhance their competitiveness. It is assisted by various public sector enterprises like:- (a) Small Industry Development Organisation (SIDO) is the apex body for assisting the Government in formulating and overseeing the implementation of its policies and programmes/projects/schemes. (b) National Small Industries Corporation Ltd (NSIC) was established by the Government with a view to promoting, aiding and fostering the growth of SSI in the country, with focus on commercial aspects of their operation. (c) The Ministry has established three National Entrepreneurship Development Institutes which are engaged in development of training modules, undertaking research and training and providing consultancy services for entrepreneurship development in the SSI sector. These are (i) National Institute of Small Industry Extension Training (NISIET) at Hyderabad, National Institute of Entrepreneurship and Small Business Development (NIESBUD) at NOIDA. (ii) Indian Institute of Entrepreneurship (HE) at Guwahati. 

2. The National Commission for Enterprises in the Unorganised Sector (NCEUS) has been constituted with the mandate to examine the problems of enterprises in the unorganised sector and suggest measures to overcome them. 

3. Small Industries Development Bank of India (SIDBI) acts as apex institution for financing SSIs through various credit schemes.

It is quite lucrative and feasible for entrepreneurs to establish industries in metropolitan and other developed cities. However, because of numerous factors such as irregular power supply, poor transport and absence of banking facilities, it is extremely difficult for them to set up industries in backward, hilly and tribal areas. As a result, there exists acute regional disparities in development between these areas and the big cities in the country. The Government of India has been making efforts to remove the regional imbalances in development by providing incentives for setting up industries in rural areas. The following are among the incentives offered.

Land: It is a basic requirement for setting up a business unit. In order to encourage the establishment of industries in backward areas, the government provides land plots at concessional rates, especially to industrialists in backward regions. This makes settingup industries cheaper. 

Power: Power is an essential requirement for the functioning of business enterprises. However, its supply is highly irregular in some parts of India. Therefore, in order to facilitate the setting up of industries in these areas, electricity is supplied at a discounted rate of 50 per cent. In addition, some states exempt such units from any payment during the initial years of operation. 

Banking and finance: Due to the poor banking facilities, industries set up in the backward areas face the problem of inadequate credit and finance. As a solution, the government provides loans at a concessional rate and offers subsidies of 10 to 15 per cent for the accumulation of capital assets. Raw Materials: Resources such as cement, iron and steel are of prime importance for industries. Since these resources are scarce, the government provides them on priority basis to industries located in backward areas. 

Tax Exemption: In order to attract entrepreneurs to set up industries in the backward areas, different state governments grant tax exemption to the industries. Thus, the industries are exempted from paying taxes for 5 to 10 years.

The contribution of small scale industries is remarkable. 

Thus, Government has provided the following institutional support to solve the problem of finance and marketing in the small scale sector:

(i) National Bank for Agriculture and Rural Development (NABARD) NABARD was setup in 1982, to promote integrated rural development. Apart from agriculture, it supports small industries, cottage and village industries, and rural art is Answer: It provides credit and offers counseling and consultancy services and organizes training and development programmes for rural entrepreneurs.

(ii) The Rural Small Business Development Centre (RSBDC) It was set up by the world association for small and medium enterprises and sponsored by NABARD. It works for the benefit of socially and economically disadvantaged individuals and groups. It aims at providing management and technical support to current and prospective micro and small entrepreneurs in rural areas.

(iii) National Small Industries Corporation (NSIC) . This was set up in 1955 with a view to promote, aid and foster the growth of small business units in the country. 

Functions of NSIC include:

1. Supply of machines on easy hire-purchase terms. 

2. Procure, supply and distribute raw materials. 

3. Export the products of small business units and develop export-worthiness. 

4. Mentoring and advisory services. 

5. Serve as technology business incubators. 

6. Creating awareness on technological up gradation. 

7. Developing software technology parks and technology transfer centers.

Scheme of ‘performance and credit rating’ of small businesses is implemented through NSIC to ensure that they score higher rating for their credit requirements as and when they approach the financial institutions for their working capital and investment requirements.

(iv) Small Industries Development Bank of India (SIDBI) SIDBI was set up as an apex bank to provide direct/indirect financial assistance under different schemes, to meet credit needs of small business organizations and to coordinate the functions of other institutions in similar activities.

(v) The National Commission for Enterprises in the Unorganized Sector (NCEUS) The NCEUS was constituted in September, 2004, with the objectives of recommending measures considered necessaiy for improving the productivity of small enterprises in the informal sector and to enhance the competitiveness of the sector in the emerging global environment by developing linkages of the sector with other institutions in the areas of credit, raw materials, infrastructure, technology up gradation, marketing, etc.

(vi) Rural and Women Entrepreneurship Development (RWED) The Rural and Women Entrepreneurship Development programme aims at promoting a conducive business environment and at building institutional and human capacities that will encourage and support the entrepreneurial initiatives of rural people and women by providing training and advisory services.

(vii) Scheme of Fund for Regeneration of Traditional Industries (SFURTI) The Central Government set up this fund to make the traditional industries more productive and competitive and to facilitate their sustainable development. The main objectives of SFURTI are to develop clusters of traditional industries in various parts of the country; build innovative and traditional skills, improve technologies and encourage public-private partnerships, develop market intelligence etc.

(viii) The District Industries Centers, (DICs) District Industries Centre is the institution at the district level which provides all the services and support facilities to the entrepreneurs for setting up small and village industries including identification of suitable schemes, preparation of feasibility reports, arranging for credit, machinery and equipment, provision of raw materials and other extension services. This was launched on 1st May, 1978.

B) Business incubators

C) Introduce improvements to products

D) Seed capital

The objectives of small scale industries are follows:

1. To create more employment opportunities with less investment.

2. To remove economic backwardness of rural and less developed regions of the economy.

3. To reduce regional imbalances.

4. To mobilize and ensure optimum utilization of unexploited resources of the country.

5. To improve standard of living of people.

6. To ensure equitable distribution of income and wealth.

7. To solve unemployment problem.

8. To attain self-reliance.

9. To adopt latest technology aimed at producing better quality products at lower costs.

The following are some of the major roles played by small scale businesses in rural India.

They generate employment opportunities: Cottage and rural industries play a significant role in providing employment opportunities, particularly to people in rural areas. This proves to be a boon especially for the economically weaker sections of the rural society. 

They enable equitable income distribution: The capital requirements of small- scale businesses are low, mainly because of their use of labour-intensive production techniques, and this encourages entrepreneurs to start units on a small scale. Smallscale businesses are, therefore, set up all over the country. Many of them providing employment opportunities to people in rural areas. This triggers the redistribution of wealth and income, and enables the equitable distribution of income in rural areas. 

They help to accelerate growth: Small-scale businesses have been considered as a major propeller for the acceleration of economic growth and as an employment generator, particularly in the rural and backward areas of India. 

They mitigate disguised unemployment and alleviate poverty: Small-scale businesses use labour-intensive production techniques, and are, therefore, able to provide employment to the excess/surplus rural labour. Thus, small-scale businesses remove disguised unemployment from the agriculture sector and at the same time provide livelihood to the rural people. Hence, they contribute to alleviating rural poverty. 

They facilitate rural development and reduce migration from rural to urban areas: It is well known that a large number of people migrate from rural to urban areas in search of better employment opportunities and improved living standards. Small-scale businesses help reduce this migration by providing employment opportunities to rural people in their own regions. By doing so, small units also help mitigate the excessive pressure on urban infrastructure.

Small-scale industries (SSIs) play an important role in ensuring the progress of developing countries such as India. The following points highlight their contribution.

• Market Share: SSIs make up 95 per cent of the industrial units in India. They contribute about 40 percent of the ‘gross industrial value added’ and 45 per cent of India’s total exports. 
• Regional Balance: SSIs produce simple products and use basic technology. In addition, these industries do not require heavy capital investment, and therefore, they can be set up by anyone anywhere across the country. Small units not only benefit the particular region where it is established but also help reduce the regional disparities in industrial development among different regions of a country. 
• Employment Generation: As SSIs use labour-intensive production techniques, they have a greater employment generation potential than large industries. Moreover, the skills required to perform jobs in SSIs are usually not very specific, which further increases their scope for generating employment. 
• Wide range of Products: Small scale units produce a large variety of consumer products, such as stationery items, safety matches, handicrafts, vegetables and processed food. Besides, SSIs also produce a few items by using technology, such as calculators, televisions and engineering goods. 
• Customized Goods: Small industrial units adapt perfectly to specific needs of consumers. As SSIs use simple and highly flexible production techniques, they can provide their customers with goods best suited to the customers tastes and preferences.

Although small business have close relationships with their existing customers, finding new customers and reaching new markets is a major challenge for small business owners. Small businesses typically find themselves strapped for time to do marketing, as they have to run the day-to-day aspects of the business. To create a continual stream of new business and find new clients and customers, they must work on marketing their business each week.

Common marketing techniques for small business include business networking (e.g., attending Chamber of Commerce events or trade fairs), “word of mouth” promotion by existing customers, customer referrals, Yellow pages directories, television, radio, and outdoor ads (e.g., roadside billboards), print ads, and Internet marketing. TV ads can be quite expensive, so they are normally intended to create awareness of a product or service. Another means by which small businesses can advertise is through the use of “deal of the day” websites such as Groupon and Living Social. These Internet deals encourage customers to patronize small businesses.

Many small business owners find internet marketing more affordable. Google AdWords and Yahoo! Search Marketing are two popular options of getting small business products or services in front of motivated web searchers. Successful online small business marketers are also adept at utilizing the most relevant keywords in their website content. Advertising on niche websites that are frequented by potential customers can also be effective, but with the long tail of the Internet, it can be time intensive to advertise on enough websites to garner an effective reach.

Creating a business website has become increasingly affordable with many do-it- yourself programs now available for beginners. A website can provide significant marketing exposure for small businesses when marketed through the Internet and other channels.

Some popular services are WordPress, JoomlaSquarespace, and EXAI. Social media has proven to be very useful in gaining additional exposure for many small businesses. Many small business owners use Facebook and Twitter as a way to reach out to their loyal customers to give them news about specials of the day or special coupons, generate repeat business and reach out to new potential clients.

The relational nature of social media, along with its immediacy and twenty-four- hour presence lend intimacy to the relationships small businesses can have with their customers, while making it more efficient for them to communicate with greater numbers. Facebook ads are also a very cost-effective way for small businesses owners to reach a targeted audience with a very specific message.

In addition to the social networking sites, blogs have become a highly effective way for small businesses to position themselves as experts bn issues that are important to their customers. This can be done with a proprietary blog and/or by using a back-link strategy wherein the marketer comments on other blogs and leaves a link to the small business’ own website. Posting to a blog about the company’s business or service area regularly can increase web traffic to a company website.

Marketing plan 

Market research – To produce a marketing plan for small businesses, research needs to be done on similar businesses, which should include desk research (done online or with directories) and field research. This gives an insight in the target group’s behavior and shopping patterns. Analyzing the competitor’s marketing strategies makes it easier for small business to gain market share.

Marketing mix – Marketing mix is a crucial factor for any business to be successful. Especially for a small business, examining a competitor’s marketing mix can be very helpful. An appropriate market mix, which uses different types of marketing, can help to boost sales.

Product life cycle – After the launch of the business, crucial points of focus should be the growth phase (adding customers, adding products or services, and/ or expanding to new markets) and working towards the maturity phase. Once the business reaches maturity stage, an extension strategy should be in place. Relaunching is also an option at this stage. Pricing strategy should be flexible and based on the different stages of the product life cycle.

Promotion techniques – It is preferable to keep promotion expenses as low as possible. ‘Word of mouth’, ‘email marketing’, ‘print-ads’ in local newspapers etc. can be effective.

Channels of distribution – Selecting an effective channel of distribution may reduce the promotional expenses as well as overall expenses for a small business.

In the US, small businesses (fewer than five hundred employees) account for more than half the non-farm, private GDP and around half the private sector employment. Regarding small business, the top job provider.is those with fewer than ten employees, and those with ten or more but fewer than twenty employees comes in as the second, and those with twenty or more but fewer than one hundred employees comes in as the third (interpolation of data from the following references). The most recent data shows firms with fewer than twenty employees account for slightly more than 18% of the employment.

According to “The Family Business Review,” “There are approximately seventeen million sole-proprietorship in the US. It can be argued that a sole-proprietorship (an unincorporated business owned by a single person) is a type of family business” and “there are twenty-two million small businesses (fewer than five hundred employees) in the US and approximately 14,000 big businesses.”

Also, it has been found that small businesses created the most new jobs in communities, “In 1979, David Birch published the first empirical evidence that small firms (fewer than 100 employees) created the most new jobs”, and Edmiston claimed that “perhaps the greatest generator of interest in entrepreneurship and small business is the widely held belief that small businesses in the United States create most new jobs.

The evidence suggests that small businesses indeed create a substantial majority of net new jobs in an average year.” Local businesses provide competition to each other and also challenge corporate giants. Of the 5,369,068 employer firms in 1995, 78.8 percent had fewer than ten employees, and 99.7 percent had fewer than five hundred employees.

World Association for Small and Medium Enterprises (WASME) is a global nongovernmental organization head quartered at Noida, India. It has been spearheading the cause and development of Small and Medium Enterprises (SMEs) world over since its inception in 1980. It has emerged, over the years, as one of the most representative, effective and leading international organizations, working towards the promotion of SMEs. The vision behind establishment of WASME was to build a world private community of small business, their supporting and financial institutions as a non-governmental organization, not influenced by any government(s). WASME has members, associates and network partners in different countries across the world. It enjoys consultative/observer status with concerned agencies in UN system such as ECOSOC, UNCTAD, WIPO, UNIDO, UNICITRAL, UNESCAP, ITC and ILO. It also cooperates actively with several intergovernmental and international organizations such as WCO, OECD, ICSB, APCTT, etc.

It is the office of the Development Commissioner for Small Scale Industries. SIDO was established in 1954 on the basis of the recommendations of the Ford Foundation. It has over 60 offices and 21 autonomous bodies under its management. These autonomous bodies include Tool Rooms, Training Institutions and Project-cum-Process Development Centres.

Various services provided by SIDO to the SMEs:

1. Facilities for testing, toolmenting, training for entrepreneurship development.

2. Preparation of project and product profiles.

3. Technical and managerial consultancy.

4. Assistance for exports.

5. Pollution and energy audits

SIDO also provides economic information services and advises Government in policy formulation for the promotion and development of SSIs. The field offices also work as effective links between the central and the state governments.

In India Village and small industries sector’ consists of traditional as well as modern small industries. It has eight sub-groups Handlooms, Handicrafts, Coir, Sericulture, Khadi Industries, Village Industries, Small Scale Industries and Power looms. Small industries and power looms come in the category of modem industries and rest are included under traditional industries. Village and small industries together provide the largest employment opportunities in India.

Government offers support to small industries in the following forms:

• Institutional support in respect of credit facilities;
• Provision of developed sites for construction of sheds;
• Supply of machinery on hire purchase system;
• Technical and financial help for technical upgradation;
• Special incentives for setting up of industries in backward areas;
• Provision for training facilities;
• Assistance for domestic and export marketing.

The main functions of NABARD pertain to policy development, coordination, research, training, etc., relating to rural credit. It provides refinance to cooperatives, regional rural banks, etc. Moreover it makes loans and advances to state governments for a period not exceeding more than 20 years to enable them to subscribe directly or indirectly to share the capital of cooperative credit societies. It also promotes research in agriculture and rural development through its research and development fund. It undertakes inspection of co-operative banks and RRBs and advises the government on related matters. NABARD undertakes monitoring and evolution of the projects financed by it. The NABARD maintains two funds; The National Rural Credit Fund (long-term operations) and the National Rural Credit Fund (Stabilization). 

The central and state governments contribute to the fund. The NABARD operates throughout the country through its 16 regional offices located in the capitals of all the major states and 3 sub offices, the paid-up capital of NABARD stood at Rs 2000 crore as on March 31, 2010. The profit after tax amounted to Rs 1558 crore during the year 2009-10 as against Rs 1390 crore during the year 2008-09. 

NABARD had a paid-up share capital of Rs 100 crore, since this has been raised through stages to Rs 5,000 crore. The NABARD is empowered to borrow from central government.It is also permitted to borrow foreign currency. It can also borrow long-term loans from any other authority or organisation or institution approved by the Board. It is empowered to issue bonds, debentures and other financial instruments.

Yes, I agree. Scale of operations can be measured in terms of workers employed, capital invested or total output. Indian Government considers the criterion of capital invested in plant and machinery. Accordingly a business in which investment in plant and machinery is less than 1 core comes under small scale business.

An industry is a micro enterprise if investment in equipment does not exceed Rs 10 lakhs. An industry is a small enterprise if investment in equipment is more than Rs 10 lakhs but does not exceed Rs 2 crore. An industry is a medium enterprise if investment in equipment is more than Rs 2 crore but does not exceed Rs 5 crore.

In Indian economy small-scale and cottage industries occupy an important place, because of their employment potential and their contribution to total industrial output and exports.

Government of India has taken a number of steps to promote them. However, with the recent measures, small-scale and cottage industries facing both internal competition as well as external competition.

There is no clear distinction between small-scale and cottage industries. However it is generally believed that cottage industry is one which is carried on wholly or primarily with the help of the members of the family. As against this, small-scale industry employs hired labour. Moreover industries are generally associated with agriculture and provide subsidiary employment in rural areas. As against this, small scale units are mainly located in urban areas as separate establishments.

Definition: Small scale industry is defined as a unit in which investment in original value of plant and machinery should not exceed Rs 1.5 crore.

However, to facilitate technology upgradation and enhance competitiveness, the investment limit has been raised to Rs 5 crore in respect of 71 high tech export oriented items in drugs, pharmaceuticals, hand-tools and knitwear sectors, etc.

Different categories include:

• Micro and tiny industries
• Women enterprises

• Cottage industries
• Village industries

Given below are the areas where small businesses feel threatened from global competition: 

• It is difficult to maintain quality standards, technological skills, financial credit worthiness, managerial and marketing capabilities of the large industries and MNCs. 
• They have to face competition from giant sized MNCs along with medium and large scale enterprises. It brings cut throat competition for them. 
• There is limited access to markets of developed countries because of stringent requirements of quality certification like ISO: 9000 etc.

plant and machinery should not exceed Rs 1.5 crore. However, to facilitate technology upgradation and enhance competitiveness, the investment limit has been raised to Rs 5 crore in respect of 71 high tech export oriented items in drugs, pharmaceuticals, hand-tools and knitwear sectors, etc. Characteristics of Small-Scale Industries: 

1. Ownership: Ownership of small scale unit is with one individual in sole- proprietorship or it can be with a few individuals in partnership. 

2. Management and Control: A small-scale unit is normally a one man show and even in case of partnership the activities are mainly carried out by the active partner and the rest are generally sleeping partners. These units are managed in a personalized fashion. The owner is actively involved in all the decisions concerning business. 

3. Area of Operation: The area of operation of small units is generally localised catering to the local or regional demand. The overall resources at the disposal of small scale units are limited and as a result of this, it is forced to confine its activities to the local level. 

4. Technology: Small industries are fairly labour intensive with comparatively smaller capital investment than the larger units. Therefore, these units are more suited for economics where capital is scarce and there is abundant supply of labour. 

5. Gestation Period: Gestation period is that period after which teething problems are over and return on investment starts. Gestation period of small scale unit is less as compared to large scale unit. 

6. Flexibility: Small scale units as compared to large scale units are more change susceptible and highly reactive and responsive to socio-economic conditions. They are more flexible to adopt changes like new method of production, introduction of new products etc. 

7. Resources: Small scale units use local or indigenous resources and as such can be located anywhere subject to the availability of these resources like labour and raw materials. 

8. Dispersal of Units: Small scale units use local resources and can be dispersed over a wide territory. The development of small scale units in rural and backward areas promotes more balanced regional development and can prevent the influx of job seekers from rural areas to cities.

These are rural-based industries owned and operated by individuals who invest their private resources in these units.

“Small Scale Industries are located in urban centers and produce goods with partially or wholly mechanised equipment employing outside labour, small in size, having little capital resources and a small labour force”

“Cottage Industries are mainly rural in character and are generally associated with agriculture involving operations mostly by hands and are carried on in the home either as a whole time or as a part time occupation, primarily with the help of members of the family.” Difference between the Small-Scale Industries and Cottage Industries: 

The differences between the small scale and cottage industries are basically two:

• While small-scale industries are mainly located in urban centres as separate establishments, the cottage industries are generally associated with agriculture and provide subsidiary employment in rural areas.
• While small-scale industries produce goods with mechanised equipment employing outside labour, the cottage industries involve operations mostly by hand which are carried on primarily with the help of the members of the family.

Cottage industries are also known as Rural industries or traditional industries.

Features of Cottage industries:

(i) Cottage industries are organized by individuals, with private resources.

(ii) Cottage industries normally use family labour and locally available talent.

(iii) The equipment used in cottage industries is simple.

(iv) Capital investment in cottage industries is small.

(v) Cottage industries produce simple products, normally in their own premises.

(vi) Cottage industries produce goods using indigenous technology.

The following are a few important features of cottage industries.

Ownership: These are rural-based industries owned and operated by individuals who invest their private resources in these units. 

Level of capital and production techniques: The amount of capital is very small, and the production techniques are highly labour-intensive and indigenous. 

Employment: These industries generally do not hire labour but employ the owners family members. 

Talent and skills: Usually, the talent and the skills required for cottage industries are found restricted to particular families. The skills are passed on from one generation to the next. For instance, the art of pottery remains restricted to potter families. 

Market: Although the production is primarily carried out for self-consumption, a portion of the output is sold in the local market as well.

In most of the developing countries like India, Small Scale Industries (SSI) constitute an important and crucial segment of the industrial sector. They play an important role in employment creation, resource utilisation and income generation and helping to promote changes in a gradual and phased manner. They have been given an important place in the framework of Indian planning since beginning both for economic and ideological reasons. The reasons are obvious. 

The scarcity of capital in India severely limits the number of non-farm jobs that can be created because investment costs per job are high in large and medium industries. An effective development policy has to attempt to increase the use of labour, relative to capital to the extent that it is economically efficient. Small Scale Enterprises are generally more labour intensive than larger organisations. As a matter of fact, small scale sector has now emerged as a dynamic and vibrant sector for the Indian economy in recent years. It has attracted so much attention not only from industrial planners and economists but also from sociologists, administrators and politicians.

Scope of Small Scale Industry:

Defining small scale industry is a difficult task because the definition of small scale industry varies from country to country and from one time to the another in the same country depending upon the pattern and stage of development, government policy and administrative set up of the particular country. Every country has set its own parameters in defining small scale sector. Generally, small scale sector is defined in terms of investment ceilings on the original value of the installed plant and machinery. But in the earlier times the definition was based on employment. In the Indian context, the parameter are as follows. The Fiscal Commission, Government of India, New Delhi, 1950, for the first time defined a small-scale industry as, one which is operated mainly with hired labour usually 10 to 50 hands. Fixed capital investment in a unit has also been adopted as the other criteria to make a distinction between small scale and large-scale industries. This limit is being continuously raised upwards by Government.

The Small Scale Industries Board in 1955 defined, “Small-scale industry as a unit employing less than 50 employees if using power and less than 100 employees if not using power and with a capital asset not exceeding Rs 5 lakhs”. ‘The initial capital investment of Rs 5 lakhs has been changed to Rs 10 lakhs for small industries and Rs 15 lakhs for ancillaries in 1975. Again this fixed capital investment limit was raised to Rs 15 lakhs for small units and Rs 20 lakhs for ancillary units in 1980. The Government of India in 1985, has further increased the investment limit to Rs 35 lakhs for small-scale units and 45 lakhs for ancillary units. Again the new Industrial Policy in 1991, raised the investment ceilings in plant an machinery to ? 60 lakhs for small-scale units and Rs 75 lakhs for ancillary units. As per the Abid Hussain Committee’s recommendations on small scale industry, the Government of India has, in March 1997 further raised investment ceilings to Rs 3 crores for small-scale and ancillary industries and to Rs 50 lakhs for tiny industry. The new policy initiatives in 1999-2000 defined small-scale industry as a unit engaged in manufacturing, repairing, processing and preservation of goods having investment in plant and machinery at an original cost not exceeding Rs 100 lakhs.

 In case of tiny units, the cost limitation is up to Rs 5 lakhs. Again, the Government of India in its budget for 2007-08 has raised the investment limit in plant and machinery of small-scale industries to Rs 1.5 crores. An ancillary unit is one which is engaged or proposed to be engaged in the manufacture of production of parts, components, sub-assemblies, tooling or intermediaries or rendering services and the undertaking supplies or renders or proposes to supply or render not less than 50% of its production or services, as the case may be, to one or more other industries undertakings and whose investment in fixed assets in plant and machinery whether held on ownership terms or lease or on hire purchase does not exceed Rs 75 lakhs. 

For small-scale industries, the Planning Commission of India uses terms ‘village and small scale industries’. These include modern small-scale industry and the traditional cottage and household industry.

Many incentives are provided both by the central and state governments to promote the growth of small-scale industries and also to protect them from the onslaught of the largescale sector. Among the various incentives given to small-scale industries the following deserve special mention:

1. Reservation: To protect the small-scale industries from the competition posed by largescale industries, the Government has reserved the production of certain items exclusively for the small-scale sector. The number of items exclusively reserved for the small-scale sector has been considerably increased during the Five Year Plan Periods and now stands at 822. However, prior to the 1997-98 budget the number of items reserved for the small- scale sector stood at 836. The Finance Minister dereserved 14 items in the 1997-98 budget.

2. Preference in Government Purchases: The government as well as government Organizations shows preference in procuring their requirements from the small- scale sector. For instance, the Director General of Supplies and Disposals purchases 400 items exclusively from the small-scale sector. The National Small-Scale Industries Corporation assists the SSI units in obtaining a greater share of government and defense purchases. 

3. Price Preference: The SSI units are given price preference up to a maximum of 15 per cent in respect of certain items purchased both from small-scale and large- scale units. 

4. Supply of Raw Materials: In order to ensure regular supply of raw materials, imported components and equipment’s, the Government gives priority allocation to the small-scale sector as compared to the large-scale sector. Further, the Government has liberalised the import policy and streamlined the distribution of scarce raw materials. 

5. Excise Duty: In respect of SSI units excise duty concessions are granted to both registered and unregistered units on a graded scale depending upon their production value. Full exemption is granted up to a production value of Rs 30 lakhs in a year and 75 % of normal duty is levied for production value exceeding Rs 30 lakhs but not exceeding Rs 75 lakhs. If the production value exceeds Rs 75 lakhs, normal rate of duty will be levied. ‘ 

6. RBI’s Credit Guarantee Scheme: In 1960, the RBI introduced a Credit Guarantee Scheme for small-scale industries. As per the scheme, the RBI takes upon itself the role of a guarantee organisation for the advances which are left unpaid, including interest overdue and recoverable charges. This scheme covers not only working capital but also advances provided for the creation of fixed capital. 

7. Financial Assistance: Small-scale industries are brought under the priority sector. As a result, financial assistance is provided to SSI units at concessional terms by commercial banks and other financial institutions. With a view to providing more financial assistance to the small scale sector, several schemes have been introduced in the recent past. The Small Industries Development Fund (SIDF) in 1986, National Equity Fund (NEF) in 1987 and the Single Window Scheme (SWS) in 1988. SIDF provides refinance assistance to small scale and cottage and village industries and the tiny sector in rural areas. NEF provides equity type support to small entrepreneurs for setting up new projects in the tiny/small-scale sector. In 1996, the small-scale sector received 42.3 per cent of the total priority sector advances from public sector banks. 

8. Technical Consultancy Services: The Small Industries Development Organisation, through its network of service and branch institutes, provides technical consultancy services to SSI units. In order to provide the necessary technical input to rural industries, a Council for Advancement of Rural Technology was set up in October, 1982. The Technical Consultancy Organisation renders consultancy services to SSI units at a subsidised rate. Many financial institutions are also providing subsidies to SSI units for availing of consultancy services. For instance, small entrepreneurs proposing to set up rural, cottage, tiny or small-scale units, can get consultancy services at a low cost from the Technical Consultancy Organizations approved by the All-India and State-level financial institutions. They have to pay only 20% of the fees charged by a Technical Consultancy Organisation. The entire balance of 80% or Rs 5, 000 whichever is lower is subsidized by the Industrial Finance Corporation of India. 

9. Machinery on Hire Purchase Basis: The National Small Industries Corporation (NSIC) arranges supply of machinery on hire purchase basis to SSI units, including ancillaries located in backward areas which qualify for investment subsidy. The rate of interest charged in respect of technically qualified persons and entrepreneurs coming from backward areas are less than the amount charged to others. The earnest money payable by technically qualified persons and entrepreneurs from backward areas is 10% as against 15% in other cases.

10. Transport Subsidy: The Transport Subsidy Scheme, 1971 envisages grant of a transport subsidy to small-scale units in selected areas to the extent of 75 % of the transport cost of raw materials which are brought into and finished goods which are taken out of the selected areas. 

11. Training Facilities: The Entrepreneurship Development Institute of India, Financial Institutions, Commercial banks, Technical Consultancy organizations, and NSIC provide training to existing and potential entrepreneurs. 

12. Marketing Assistance: The National Small Industries Corporation (NSIC), the Small Industries Development Organisation (SIDO) and the various Export Promotion Councils help SSI emits in marketing their products in the domestic as well as foreign markets. The SIDO conducts training programmes on export marketing and organises meetings and seminars on export promotion. 

13. District Industries Centers (DICs): The 1977 Industrial Policy Statement introduced the concept of DICs. Accordingly a DIC is set up in each district. The DIC provides and arranges a package of assistance and facilities for credit guidance, supply of raw materials, marketing etc.

(a) Land: In order to encourage the establishment of industries in backward areas, the government provides land plots at concessional rates, especially to industrialists in backward regions. 

(b) Power: Power is an essential requirement for the functioning of business enterprises.

Small businesses use various sources available for start-up capital:

• Self-financing by the owner through cash savings, equity loan on his or her home, and or other assets 
• Loans or financial gifts from friends or relatives 
• Grants from private foundations, government or other sources 
• Private stock issue 
• Forming partnerships 
• Angel investors 
• Loans from banks, credit unions, or other financial institutions 
• SME finance, including collateral-based lending and venture capital, given sufficiently sound business venture plans.

Some small businesses are further financed through credit card debt – usually a poor choice, given that the interest rate on credit cards is often several times the rate that would be paid on a line of credit at a bank or a bank loan. Recent research suggests that the use of credit scores in small business lending by community banks is surprisingly widespread.

Moreover, the scores employed tend to be the consumer credit scores of the small business owners rather than the more encompassing small business credit scores that include data on the firms as well as on the owners. Many owners seek a bank loan in the name of their business; however, banks will usually insist on a personal guarantee by the business owner.

In the United States, the Small Business Administration (SBA) runs several loan programs that may help a small business secure lo Answer: In these programs, the SBA – guarantees a portion of the loan to the issuing bank, and thus, relieves the bank of some of the risk of extending the loan to a small business. The SBA also requires business owners to pledge personal assets and sign as a personal guarantee for the loan.

The 8(a) Business Development Program assists in the development of small businesses owned and operated by African Americans, Hispanics, and Asians. Canadian small businesses can take advantage of federally funded programs and services. See Federal financing for small businesses in Canada (grants and loans).

On October 2010, Alejandro Cremades and Tanya Prive founded the first equity crowdfunding platform for small businesses in history as an alternative source of financing. The platform operates under the name of Rock The Post.

Government uses the criterion of size of capital employed in plant and machinery to define Small Scale Industries. It is depicted in the table given below:

The official definitions of the small scale unit are as follows: 

1. Small-Scale Industries: These are the industrial undertakings having fixed investment in plant and machinery, whether held on ownership basis or lease basis or hire purchase basis not exceeding Rs 1 crore. 

2. Ancillary Industries: These are industrial undertakings having fixed investment in plant and machinery not exceeding Rs 1 crore engaged in or proposed to engage in, (a) The manufacture of parts, components, sub-assemblies, tooling or intermediaries, or (b) The rendering of services supplying 30 per cent of their production or services as the case may be, to other units for production of other articles. 

3. Tiny Units: These refer to undertakings having fixed investment in plant and machinery not exceeding Rs 23 lakhs. These also include undertakings providing services such as laundry, xeroxing, repairs and maintenance of customer equipment and machinery, hatching and poultry etc. located m towns with population less than 50,000 

4. Small-Scale Service Establishments: These mean enterprises engaged in personal or household services in rural areas and town with population not exceeding 50000 and having fixed investment in plant and machinery not exceeding Rs 25 lakhs. 

5. Household Industries: These cover artisans, skilled craftsman and technicians who can work in their own houses if their work requires less than 300 square feet space, less than 1 Kw power, less than 5 workers and no pollution is caused. Handicrafts, toys, dolls, small plastic and paper products, electronic and electrical gadgets are some of the examples of these industries.

Small businesses often join or come together to form organizations to advocate for their causes or to achieve economies of scale that larger businesses benefit from, such as the opportunity to buy cheaper health insurance in bulk. These organizations include local or regional groups such as Chambers of Commerce and independent business alliances, as well as national or international industry-specific organizations.

Such groups often serve a dual purpose, as business networks to provide marketing and connect members to potential sales leads and suppliers, and also as advocacy groups, bringing together many small businesses to provide a stronger voice in regional or national politics. In the case of independent business alliances, promoting the value of locally owned, independent business (not necessarily small) through public education campaigns is integral to their work.

The largest regional small business group in the United States is the Council of Smaller Enterprises, located in Greater Cleveland. United Kingdom trade and Investment (www.ukti.gov.ih) gives out research in different markets around the world, also research in program planning and promotional activities to exporters. The BEXA (British Exporters Association) role is to connect new exporters to expert services, it can provide details about regional export contacts, who could be made informally to discuss issues.

Trade associations and ail major banks could often provide links to international groups in foreign markets, same could also help set up joint venture, trade fairs etc. A number of youth organizations, including 4-H, Junior Achievement, and Scouting have special interactive programs and training to help young people run their own small business under adult supervision.

In a developing country like India, the role and importance of small-scale industries is very significant towards poverty eradication, employment generation, rural development and creating regional balance in promotion and growth of various development activities. It is estimated that this sector has been contributing about 40% of the gross value of output produced in the manufacturing sector and the generation of employment by the small scale sector is more than five times to that of the large-scale sector. This clearly shows the importance of small-scale industries in the economic development of the country. The small-scale industry has been playing an important role in the growth process of Indian economy since independence in spite of stiff1 competition from the large sector and not very encouraging support from the government. The following are some of the important role played by small scale industries in India.

1. Employment Generation: The basic problem that is confronting the Indian economy is increasing pressure of population on the land and the need to create massive employment opportunities. This problem is solved to larger extent by small- scale industries because small scale industries are labour intensive in character. They generate huge number of employment opportunities. Employment generation by this sector has shown a phenomenal growth. It is a powerful tool of job creation. 

2. Mobilisation of resources and entrepreneurial skill: Small-scale industries can mobilize a good amount of savings and entrepreneurial skill from rural and semi- urban areas remain untouched from the clutches of large industries and put them into productive use by investing in small-scale units. Small entrepreneurs also improve social welfare of a country by harnessing dormant, previously overlooked talent. Thus, a huge amount of latent resources are being mobilised by the small-scale sector for the development of the economy. 

3. Equitable distribution of income: Small entrepreneurs stimulate a redistribution of wealth, income and political power within societies in ways that are economically positive and without being politically disruptive. Thus small-scale industries ensures equitable distribution of income and wealth in the Indian society which is largely characterised by more concentration of income and wealth in the organised section keeping unorganised sector undeveloped. This is mainly due to the fact that small industries are widespread as compared to large industries and are having large employment potential.

4. Regional dispersal of industries: There has been massive concentration of industries in a few large cities of different states of Indian union. People migrate from rural and semi urban areas to these highly developed centres in search of employment and sometimes to earn a better living which ultimately leads to many evil consequences of overcrowding, pollution, creation of slums, etc. This problem of Indian economy is better solved by small scale industries which utilize local resources and brings about dispersion of industries in the various parts of the country thus promotes balanced regional development. 

5. Provides opportunities for development of technology: Small scale industries have tremendous capacity to generate or absorb innovations. They provide ample opportunities for the development of technology and technology in return, creates an environment conducive to the development of small units. The entrepreneurs of small units play a strategic role in commercializing new inventions and products. It also facilitates the transfer of technology from one to the other. As a result, the economy reaps the benefit of improved technology. 

6. Indigenization: Small scale industries make better use of indigenous organizational and management capabilities by drawing on a pool of entrepreneurial talent that is limited in the early stages of economic development. They provide productive outlets for the enterprising independent people. They also provide a seed bed for entrepreneurial talent and a testing round for new ventures. 

7. Promotes exports: Small scale industries have registered a phenomenal growth in export over the years. The value of exports of products of small-scale industries has increased to Rs 393 erores in 1973-74 to Rs 71, 244 crores in 2002-03. This contributes about 35% India’s total export. Thus they help in increasing the country’s foreign exchange reserves thereby reducing the pressure on country’s balance of payment. 

8. Supports the growth of large industries: The small scale industries play an important role in assisting bigger industries and projects so that the planned activity of development work is timely attended. They support the growth of large industries by providing components, accessories and semi finished goods required by them. In fact, small industries can breathe vitality into the life of large industries. 

9. Better industrial relations: Better industrial relations between the employer and employees helps in increasing the efficiency of employees and reducing the frequency of industrial disputes. The loss of production and man days are comparatively less in smallscale industries. There is hardly any strikes and lock out in these industries due to good employee-employer relationship.

District Industries Centers programme was launched on May 1, 1978 with a view to providing an integrated administrative framework at the district level which looks at the problem of industrialisation in the district.

India is a developing country and in developing countries the scope of small scale “industries are very wide. 

It is contributing to the socio-economic development in the following ways:

(i) Contribution in GDP Small industries in India account for 96% of the industrial units in the country. They, contribute almost 40% of the gross industrial value added in the economy.

(ii) Contribution in Exports 45% of the total exports from India come from small scale industries. Gems and jewellery, handicrafts, sports goods, etc. are some items of exports from small scale sector.

(iii) Employment Generation Small industries are the second largest employers of human resources, after agriculture and generate more number of employment opportunities per unit of capital invested compared to large industries.

(iv) Variety of Production Small industries produce a wide variety of products ranging from mass consumption goods, ready made garments, hosiery goods, stationery items, soaps and detergents, domestic utensils, leather, plastic and rubber goods, processed foods and vegetables, wood and steel furniture, paints, varnishes, safety matches, etc. to the sophisticated items like electric and electronic goods, drugs and pharmaceuticals, agricultural tools and equipment and several other engineering products. Hand looms, handicrafts and other products from traditional village industries add to this diverse production from SSIs.

Regieiial Balance Small induslries confriT’ri-fte-sjgnificantly to the balanced development of the country as they produce simple products using simple technologies and depend on locally I available resources both material and labour and can be set up anywhere in the country.

(vi) Entrepreneurship Development Small industries provide opportunity for entrepreneurship development in the country. The latest skills and talents of people can be transformed into business ideas with little capital investment and almost nil formalities to start a small business.

(vii) Low Cost of Production Small industries have the advantage of low cost of production as they use locally I available resources which are less expensive: Establishment and running costs of I small industries are lower because of low overhead expenses.

(viii) Quick Decision Making Due to the small size of the organizations quick and timely decisions can be taken without consulting many people. New business opportunities can therefore be captured at the right time.

(ix) Customized Production Small industries can design the product as per the tastes/preferences/needs of individual customers. They can provide customized production for even non-traditional products such as computers and other such products. They can produce according to the needs „ of the customers as they use simple and flexible production techniques.

(x) Personal Touch Small industries have inherent strength of adaptability and a personal touch and therefore maintain good personal relations with both customers and employees. The government does not have to interfere in the functioning of a small scale unit.

It promotes, provides aid and fosters the growth of small business units in the country. This focuses on the commercial aspects of these functions.

The India account for the total industrial units: 95%

Small businesses are privately owned corporations, partnerships, or sole proprietor ships that have fewer employees and/or less annual revenue than a regular¬sized business or corporation.

Small businesses often face a variety of problems, some of which are related to their size. A frequent cause of bankruptcy is under capitalization. This is often a result of poor planning rather than economic conditions. It is a common “rule of thumb” that the entrepreneur should have access to a sum of money at least equal to the projected revenue for the first year of business in addition to his or her anticipated expenses.

For example, if the prospective owner thinks that he or she will generate $100,000 in revenues in the first year with $150,000 in start-up expenses, then he or she should have not less than $250,000 available. Failure to provide this level of funding for the company could leave the owner liable for all of the company’s debt should he or she end up in bankruptcy court, under the theory of under Capitalization.

In addition to ensuring that the business has enough capital, the small business owner must also be mindful of contribution margin (sales minus variable costs). To break even, the business must be able to reach a level of sales where the contribution margin equals fixed costs. When they first start out, many small business owners under-price their products to a point where even at their maximum capacity, it would be impossible to break even. Cost controls or price increases often resolve this problem.

In the United States, some of the largest concerns of small business owners are insurance costs (such as liability and health), rising energy costs, taxes, and tax compliance. In the United Kingdom and Australia, small business owners tend to be more’concerned with excessive governmental red tape.

Contracting fraud has been an ongoing problem for small businesses in the United States. Small businesses are legally obligated to receive a fair portion (23 percent) of the total value of all the government’s prime contracts as mandated by the Small Business Act of 1953. Since 2002, a series of federal investigations have found fraud, abuse, loopholes, and a lack of oversight in federal small business contracting, which has led to the diversion of billions of dollars in small business contracts to large corporations.

Another problem for many small businesses is termed the ‘Entrepreneurial Myth’ or E-Myth. The mythic assumption is that an expert in a given technical field will also, be expert at running that kind of business. Additional business management skills are needed to keep a business running smoothly. Some of this misunderstanding arises from the failure to distinguish between small business managers as entrepreneurs or capitalists. While nearly all owner-managers of small firms are obliged to assume the role of capitalist, only a minority will act as entrepreneur. The line between an owner- manager and an entrepreneur can be defined by whether or not their business is growth oriented. In general, small business owners are primarily focused on surviving rather than growing; therefore, not experiencing the five stages of the corporate life cycle (birth, growth, maturity, revival, and decline) like an entrepreneur would.

Another problem for many small businesses is the capacity of much larger businesses to influence or sometimes determine their chances for success. Business networking and social media has been used as a major tool by small businesses in the UK, but most of them just use a “scatter-gun” approach in a desperate attempt to exploit the market which is not that successful. Over half of small firms lack a business plan, a tool that is considered one of the most important factors for a venture’s success.

Business planning is associated with improved growth prospects. Funders and investors usually require a business plan. A plan also serves as a strategic planning document for owners and CEOs, which can be used as a “bible” for decision-making An international trade survey indicated that the British share of businesses which are exporting rose from 32% in 2012 to 39% in 2013.

Although this may seem positive, in reality the growth is slow, as small business owners shy away from exporting due to actual and perceived barriers. Learning the basics of a foreign language could be the solution to open doors to new trade markets, it is a reality that not all foreign business partners speak English. China is stated to grow by 7.6% in 2013 and still sadly 95% of business owners who want to export to China have no desire and no knowledge to » learn their local language.

Bankruptcy: When small business fails, the owner may file for bankruptcy. In most cases, this can be handled through a personal bankruptcy filing. Corporations can file bankruptcy, but if .it is out of business and valuable corporate assets are likely to be repossessed by secured creditors, there is little advantage to going to the expense of a corporate bankruptcy. Many states offer exemptions for small business assets so they can continue to operate during and after personal bankruptcy.

However, corporate assets are normally not exempt; hence, it may be more difficult to continue operating an incorporated business if the owner files bankruptcy. Researchers have examined small business failures in some depth, with attempts to model the predictability of failure.

Social responsibility: Small businesses can encounter several problems, related to engaging in corporate social responsibility, due to characteristics inherent in their size. Owners of small businesses often participate heavily in the day-to-day operations of their companies. This results in a lack of time for the owner to coordinate socially responsible efforts, such as supporting local charities or not-for-profit activities.

Additionally, a small business owner’s expertise often falls outside the realm of socially responsible practices, which contribute to a lack of participation. Small businesses also face a form of peer pressure from larger forces in their respective industries, making it difficult to oppose and work against industry expectations.

Furthermore, small businesses undergo stress from shareholder expectations. Because small businesses have more personal .relationships with their patrons and local shareholders, they must also be prepared to withstand closer scrutiny if they want to share in the benefits of committing to socially responsible practices or not.

Job quality: While small businesses employ over half the workforce in the US and have been established as a main driving force behind job creation, the quality of the jobs these businesses create has been called into question. Small businesses generally employ individuals from the Secondary labour market. As a result, in the U.S., wages are 49% higher for employees of large firms. Additionally, many small businesses struggle or are unable to provide employees with benefits they would be given at larger firms. Research from the U.S. Small Business Administration indicates that employees of large firms are 17% more likely to receive benefits including salary, paid leave, paid holidays, bonuses, insurance, and retirement plans.

Both lower wages and fewer benefits combine to create a job turnover rate among U.S. small businesses that is three times higher than large firms. Employees of small businesses also must adapt to the higher failure rate of small firms, which means that they are more likely to lose their job due to the firm going under. In the U.S. 69% of small businesses last at least two years, but this percentage drops to 51% for firms reaching five years in operation.

The U.S. Small Business Administration counts companies with as much as $35.5 million in sales and 1,500 employees as “small businesses”, depending on the industry. Outside government, companies with less than $7 million in sales and fewer than five hundred employees are widely considered ’small businesses.

Small businesses are privately owned corporations, partnerships, or sole proprietor ships that have fewer employees and/or less annual revenue than a regular-sized business or corporation. Businesses are defined as “small” in terms of being able to apply for government support and qualify the preferential tax policy varies depending on the country and industry.

Small businesses range from fifteen employees under the Australian Fair Work Act 2009, fifty employees according to the definition used by the European Union, and fewer than five hundred employees, to qualify for many U.S. Small Business Administration programs. While small businesses can also be classified according to other methods, such as annual revenues, shipments, sales, assets, or by annual gross or net revenue or net profits, the number of employees is one of the most widely used measures..

Small businesses in many countries include service or retail operations such as convenience stores, small grocery stores, bakeries or delicatessens, hairdressers or tradespeople (e.g., carpenters, electricians), restaurants, guest houses, photographers, very small-scale manufacturing, and Internetrelated businesses such as web design and computer programming. Some professionals operate as small businesses, such as lawyers, accountants, dentists and medical doctors (although these professionals can also work for large organizations or companies).

Small businesses vary a great deal in terms of size, revenues and regulatory authorization, both within a country and from country to country. Some small businesses, such as a home accounting business, may only require a business license. On the other hand, other small businesses, such as day cares, retirement homes and restaurants serving liquor are more heavily regulated, and may require inspection and certification from various government authorities.

Many small businesses can be started at a low cost and on a part-time basis, while a person continues a regular job with an employer or provides care for family members in the home. In developing countries, many small businesses are sole-proprietor operations such as selling produce at a market stall or preparing hot food to sell on the street, that provide a small income.

In the 2000s, a small business is also well suited to Internet marketing; because, it can easily serve specialized niches, something that would have been more difficult prior to the Internet revolution which began in the late 1990s. Adapting to change is crucial in business and particularly small business; not being tied to the bureaucratic inertia associated with large corporations, small businesses can respond to changing marketplace demand more quickly.

Small business proprietors tend to be in closer personal contact with their customers and clients than large corporations, as small business owners see their customers in person each week. One study showed that small, local businesses are better for a local economy than the introduction of new chain stores. By opening up new national level chain stores, the profits of locally owned businesses greatly decrease and many businesses end up failing and having to close. This creates an exponential effect. When one store closes, people lose their jobs, other businesses lose business from the failed business, and so on. In many cases, large firms displace just as many jobs, as they create.

Independence is another advantage of owning a small business. A small business owner does not have to report to a supervisor or manager. In addition, many people desire to make Jheir own decisions, take their own risks, and reap the rewards of their efforts. Small business owners possess the flexibility and freedom to making their own decisions within the constraints imposed by economic and other environmental factors. However, entrepreneurs have to work for very long hours and understand that ultimately their customers are their bosses.

Several organizations in the United States also provide help for the small business sector, such as the Internal Revenue Service’s Small Business and Self-Employed One-Stop Resource. Small businesses (often carried out by family members) adjust quicker to the changing conditions; however, they are closed to the absorption of new knowledge and employing new labor from outside.

Rs. One crore (Rs 5 crore for specified 71 products)

Researchers and analysts of small or owner-managed businesses generally behave as of normal organizational forms (e.g., partnership, sole-trader, or corporation), and the consequent legal and accounting boundaries of owner-managed firms are consistently meaningful. However, owner-managers often do not delineate their behavior to accord with the implied separation between their personal and business interests.

Lenders also often contract around organizational (corporate) boundaries by seeking personal guarantees or accepting privately held assets as collateral. Because of this behavior, researchers and analysts may wish to be cautious in the way they assess the organizational types and implied boundaries in contexts relating to owner-managed firms. These include analyses that use traditional accounting disclosures, and studies that view the firm as defined by some formal organizational structure.

Relationship with entrepreneurship: 

In contrast, entrepreneurial ventures offer an innovative product, process or service, and the entrepreneur typically aims to scale up the company by adding employees, seeking international sales, and so on, a process which is financed by venture capital and angel. Successful entrepreneurs have the ability to lead a business in a positive direction by proper planning, to adapt to changing environments and understand their own strengths and weakness.The term “entrepreneur” is often conflated with the term “small business” or used interchangeably with this term. While most entrepreneurial ventures start out as a small business, not all small businesses are entrepreneurial in the strict sense of the term. Many small businesses are sole proprietor operations consisting solely of the owner, or they have a small number of employees, and many of these small businesses offer an existing product, process or service, and they do not aim at growth.

Size definitions:The legal definition of “small business” varies by country and by industry. In the United States, the Small Business Administration establishes small business size standards on an industry-by industry basis, but generally specifies a small business as having fewer than five hundred employees for manufacturing businesses and less than $7.5 million in annual receipts for most non manufacturing businesses.

The definition can vary by circumstance – for example, a small business having fewer than twenty-five full-time equivalent employees with average annual wages below $50,000 qualifies for a tax credit under the health care reform bill Patient Protection and Affordable Care Act. The European Union generally defines a small business as one that has fewer than fifty employees. However, in Australia, a small business is defined by the Fair Work Act 2009 as one with fewer than fifteen employees. By comparison, a medium-sized business or mid-sized

It is an assumption that small business are just franchisees, but the truth is many franchisers are also small businesses, Although considered to be a successful way of doing business, literature has proved that there is a high failure rate in franchising as well, especially in UK, where research indicates that out of 1658 franchising companies operating in 1984, only 601 remained in 1998, a mere 36%.

• They are run as sole proprietorship or partnership. 
• Normally they use labour intensive methods.