Problems and Prospects of Operating a Small Scale Business

Problems and Prospects of Operating a Small Scale Business

Problems and Prospects of Operating A Small Scale Business – Many books has been written on hotel operation and management.  In this review, the researcher has tried not to restrict Haines of to the books dealing with hotels alone but a combination of both hotels with the small scale business background.  This in view of the fact that not very many works have been done locally on the subject of hotel operation and management.

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Definition of Small Scale Business

This is definition of small-scale industry there is accepted universally.  The definitions may differ from state to state and from institution to institution, definitions are usually based on the level of economic development of the particular economy and the purpose of the definition, however, there are standard adopted by who defined small scale industry.  In the opinion of Boom Longenecher (1983) the definition are not legally fixed since people with some of the standard being number of employee, assets size, volume of sales, initial capital outlag, ownership structure, management style, profit level, market share, type of industry or a combination of two or more of the above criteria.  Generally accepted as a sound criteria is investment of fixed capital, though a fixed amount is used as a bases of any definition, the definition must be flexible for easy adjustment and to keep with changing needs of industrial development.  There are therefore some of the definition of small scale business as written by Agbo G.O. (2000).

According to Kotler Lawrence (1973), small scale industry is an industry which is independently owned and operated and not dominant in its area of operation.

Drucker P.F. (1974) maintains that there is only one criteria which with a fair degree of reliability indicates whether a business required at not most one man who is not engaged in any other financial work required.  The man at the top of knows who the few people in the organization in whom responsibility for the organization, in whom responsibility for the result rest without having to consult his records or association.  Drucker summed it up by asserting that regardless of textiles and position it can handly exceed twelve to fittermem which is about the number one man commercially  know and really be familiar with.

The Committee for economic development (CED) of the United State has given a valuable list of characteristic of small business which states that a small business will have at least two of the following characteristics.

  1. Management are also owners
  2. Area of operation are mainly local
  3. Owner sources capital
  4. Small size within the industry.

According to Small Business Administration (SBA), a Federal Government agency established in 1953 to advice, assets and prefect small business, defined to small scale business is not rigidly fixed, but can be related to exceptional cases so for as the particular firm is not dominant in the whole industry.

Japan employs a differential measure between the industrial and commercial sectors.  These includes a measure and a maximum size of Boo employees, manufacturing sectors and a maximum of 50 employees in commerce.

Other definitions of small firms operation in some developing economics like:- in India small scale industry is one with investment implant and machinery not exceeding 12 and 10 lakes.

In Malaysia, it is an enterprise with shareholder fund of less than N250,00 and loss than 50 workers.  Cameroon defined for either tax papered or commercial activity as enterprise with investment and ceiling of 20 million Frances CFA and 50 million Frances CFA respectively for each purpose.  Industry with a capital investment up to N159,000 in machinery and equipment alone this excludes working capital and cost of land.

From the above, it can be discussed that there are only two major ways of defining a small scale industry, a qualitative and quantitative approach.  A quantitative approach tasks about the number or size of people employed in the business and the sales volume.  Quantitative there are about four characteristics.

  1. Owner supplies capital
  2. Managers are also owners
  3. It is operated in local area
  4. The size is small in consideration with other industries.
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Therefore in distinguishing between big business and small business some of the criteria used are relative size, type of customers, financial strength and number of employees.

Furthermore, the central bank defines it as an establishment with a total investment of N100 million or 1 million dollars excluding cost of land but including working capital.

In my view, however the small scale business enterprise is one that ranges up to 10 employees with capital investment of N2000, to N20,000.  the definition is promoted by the fact that almost anything one does in Nigeria to earn a living today by way of personal employment can rightly be regarded as small business.

Why People Want to go into Business Ownership

Most Nigerians at think of having their own business, even when they are still serving others or in paid employment they dream of establishing their own business enterprises during their life time.  Nwachukwu (1990) views sound of the reasons why people wish to own business as follows:-

  1. They see ownership as means of generating profit and thus becoming wealthy.  Keith and Cubelum (1978) defined business as the sum of the activities concerned with the creation and distribution of goods and services for private profit.  Thus, the profitability in business attracts people into owing or going into business.  It may farroult to be true one succeeds but or make enough profit as to become wealthy.
  2. They see it as an opportunity to do what they love doing.  For instance, owning a rally or wholesale store, transport company, a hotel being identified with well organized and profitability business or being associated with high quality product or service.
  3. People also have to go into business ownership because it seems the best way of getting away from paid employment constraints, politics or career dead lock.  When one is working as a paid employee in an organization especially public owned organization, the policy of the organization may change as the government change, sometimes appointments are made and one find him/her self receiving instruction from a media or one may find that paid employment blind focal and may not realize that self employment would be more uncreative..
  4. Going into private business is seen as a way of preparing for retirement, a placed spend the rest of one’s productive days away from a life that is dual and closefitting.  In most cases, people see paid employment as dull and lazy man’s job, and most of the time working without having job satisfaction, because of the constraints, people prefer to prepare for what they would retire on when they retire from active work.
  5. Some others would want to own business to emulate successful businessmen who has acquired leadership in business with attendant power.  Some leadership confers on such people.  Because some businessmen are successful in their private business and are respected in the society, and such people are powerful in the society, others would want to emulate them, not realizing that it is not everybody that owns a business that is successful.
  6. Ownership of the business may be an alternative when steadily paid employment could not be secured.  It is sometimes not easy to find paid employment like is the case.  In Nigeria today the school levers have no alternative team to go into private business ownership at least for one to be financially independent.
  7. Others would want to go into business ownership because they generally believe they have some thing special to offer in the form of a product or service.  To such group of in dividing life cannot be fulfilled censes the desired is realized.  For example a young school lever who thinks he has the ability of which he has learnt in school in a way that will surpass that of the other but because of lack of finance could not immediately go into private business would not be happy or computable unless this desire is realized and the moment he can lay his hand on or private enough fund for that, he would leave the paid employment and establish andesine business.

Whatever is the reason for going into private business, human beings generally love to be independent and thus can be achieved through one control of his activated.

Scope of Small Scale Business

There is no limitation to business opportunities available to small scale managers, they are not restricted to any sector of the economy.  As such small scale managers can go into any kind of business of their choice except that they have to abide by the rules and regulations of the country as it affect business.  Agbo G.O. (2003) classified those opportunities available to include the following.

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1.       Reviewing “food” grocery fast – prepared hotel especially appliances.   Hardware, building materials and clothing.

2.       Services:     Service auto repair, appliance repair, building and renovation, plumbing, electrical, floor covering, travel agencies.

3.       Research and Development:- Materials, product software, information system, manufacturing systems and equipment.

4.       Wholesale:-          Jobbers, brokers, distributors, manufacturing and manufactures agent.

5.       Consulting:-        Management runs financial investment, marketing risk management, legal land use government.

6.       Manufacturing:- (1) metals (a) metal sheet, (b) machine shop, (2) poultry, plastics (3) food processing (a) meat (b) vegetable (4) paper and pulp (b) construction.

Roles Of Small Scale Business In National Economy

Small-scale business enterprise in this country have on their own made immense contribution to the development of the national economy over the years.  Ani B.N (2001) gave the extent of economic contributions as follows:-

1.       Employment Generation:-     Before independence, government establishment were the major employment of labour, but these days with many private enterprises set up by entrepreneurs, many people have gained employment with these enterprises and this has reduced the dependence on government establishment and large firms for employment.

2.       Direct creation of wealth by increasing contribution to the Gross National Product (GNP).  The gross national product is the total naira value of all the goods and services produced in the country in a particular year.  If the GNP increases each year, it is a sign that the economy is growing and wealth is being created.

3.       Providing Technical Innovation:-   Small business challenge large well established firms in many ways concerned to them because more efficient and more responsible to consumer need.  A small business cannot of conse compete with a large firms across the board.  But a number of small enterprise each competing in its own particular way, together have the desired competitive effort.

4.       Filling Needs of Society and Other Business:-    Large firms must by their nature operate in large scale.  Many may be unwilling or unable to meet the special needs of smaller groups of consumers, such create almost ready market for small business which can tailor their products to these groups and face their need profitability. Small business also provides variety of goods and services to each other and to large firms generally long parts expensive them manufacturing the parts in their own factories.

Sources Of Fund For Small Scale Business

Personal savings is the major sources of finance for the entrepreneurs.  This is accelerated savings earned by him as an employee elsewhere or inherited.  The proprietor of the small firms may perhaps supplement his personal savings with loans from  friends and relations.  Agbo G.O. (200) identified other source of fund for small scale business to include ploughed back profits, grants and acids.

The small scale business enterprise realization of the importance of promoting small scale enterprise, the federal government has continued to pay pioneering and active role.  The first serious policy to promote the decidement of small scale enterprise came in (1970).  To this effect, the small-scale industry division of the federal ministry of industries was established to imitate and implement Nigeria and promotion of small year.  The Industrial Development Centre (IDCs) were established to provide technical support and manpower training.

The federal government policy objectives in the context are summarized as follows:-

  1. Industrial development and national integration through industrial disposal.
  2. Provision of greater employment opportunity.
  3. Increased production of manufacturing and exports.
  4. The development of indigenous technology

According, the government has employed a combination of monetary and fiscal measures as well as industrial incentives to enhance achievement of the desire goals.  Specifically the government has played encouraging roles in:-

  1. Providing infrastructure facilities for small scale enterprise by setting up industrial estates and areas to reduce overhead cost for industrialists.
  2. Providing local financing through it agencies particularly the Nigeria Industrial Development (NID) and the World Bank assisted small scale enterprise apex unit.
  3. Directing the bank through its credit guider cines directed the banks to lead a given proportion their loans and advances to operators of small scale enterprise.
  4. Facilitating and finding institutions like the centre for industrial research and development Obafeme Awolowo University Ile-Ife with purpose of training personal in small scale industries manage and conducting, research into small scale business problems.
  5. Acquainting policy makers and finance with the features and needs of small scale enterprise by facilitating and guaranteeing internal such as the World Bank and African Development bank, Industrial policy of Nigeria.  The small scale business hotel business falls with the sphere of small scale business.  Therefore the principle and political outline for the management of the small scale business apply.  To only short coming is that most books on hotel are foreign view, emast be facing, do not make critical review of some of them.  Medlik (2000) in his book traced the early industrial development of the hotel and catering services as an industry.  This book clearly defined what is all about that hotel is described as the supply or prepared food and where travelers could spend a night.  It also discussed the various costs of running a hotel such as labour, fixed cost and variable cost etc.
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Feasibility Study

According to Gray W.S. Salvaborell (1980), feasibility study and market research are the key features that determine the location of a hotel for the hotel to be located at a place where travelers and other people like to eat away from home, such as places where there are business activities.  The book goes on to discuss cost element in running a hotel, its clear that the difference cost element should determine the margin of profit to be aimed at the sale of food.

Tervel, M.T. (1979) talks to the business of hotel as a system of large quantity food production business.  The book is also discussing standard setting quantity and how to achieve the safety and sanitation production, control, materials procurement.

In discussing the factor affecting sales volumes in a hotel, Cella R. (1979) mentioned the following:- site advertising quantity of product building structure and handling of customer of completion as the factors of well taken care of are bound to make for relatively high increases in sales volume.

Olayede S.O. (1980) took up the problems in Nigeria hotels from the point of view of the availability of foodstuff and the problem associated with getting them from the source in the hotels.  It is good piece that can inspire any bad wishing to write on hotels management and operation in Nigeria.  The hotel business in Nigeria should reflect the Nigeria types of food and meals efforts to get them developed to the level of international acceptance.

Problems Of Small Scale Enterprise

Government has initiated loudable policies to support the small scale business sectors in the Nigerian economy.  But they still exists some problems have limited their access to capital and other services for which government polices are specifically meant to solve some of these problems include poor management, high rates of business failure, low productivity, under capitalization, poor accounting standards shortage of still indiscipline.

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  1. Please comment on the challenges of small scale business operation in nigeria

  2. like this work

  3. Ezihe stella says:

    Prospects and problems of small scale business in nigeria

  4. I thought those problems would had been more elaborate.

  5. Nwabueze akachukwu says:

    How am I sure that this is not a big scam

  6. Well articulated piece of research work but spelling needs to be addressed because different people may be reading your input.I respect you okay,cheers.

  7. ikechukwu okagbo says:

    nice one, actually working on something on this thanks for the information

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