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Characteristics of Small Scale Business

The following are the characteristics of small scale business:

1. High Labor Intensity
2. Less Capital Intensive
3. Use of Local Skills and Knowledge
4. Flexibility
5. Entrepreneurial Spirit
6. Use of Indigenous Raw Materials
7. Localised Operation
8. Lesser Gestation Period
9. Workplace Culture

High Labor Intensity

Small-scale industries are fairly labor-intensive. They provide an economic solution by creating employment opportunities in urban and rural areas at a relatively low cost of capital investment.

Less Capital Intensive

Small-scale industries can be started with very little investment. They usually have much smaller capital than larger enterprises. The term “shoe-string budget” refers to businesses that operate under very tight budgets. Small businesses sometimes run out of room in the business owner’s home; this cuts the cost of renting office space.

Use of Local Skills and Knowledge

The Government of India is striving to improve the economic and social conditions of the rural population and non-farm sector through a host of measures including the creation of productive employment opportunities based on the optimal use of local raw materials and skills.

Flexibility

Small-scale industries are flexible in their operation. They adapt quickly to various factors that play a large part in daily management. Their flexibility makes them best suited to a constantly changing environment.

Entrepreneurial Spirit

A small-scale unit is generally a one-man show. It is mostly set up by individuals. Even some small units are run by a partnership firm or company; the activities are mainly carried out by one of the partners or directors.

Therefore,’ they provide an outlet for expression of the entrepreneurial spirit. As they are their own boss, the decision-making process is fast and at times more innovative.

Use of Indigenous Raw Materials

Small-scale industries use indigenous raw materials and promote intermediate and capital goods. They contribute to faster balanced economic growth in a transitional economy through decentralization and dispersal of industries in the local areas.

Localised Operation

Small-scale industries generally restrict their operation to local areas in order to meet the local and regional demands of the people. They cannot enlarge their business activities due to limited resources.

Lesser Gestation Period

The gestation period is the period after which the return on investment starts. It is the time period between setting the units and the commencement of production.

Small-scale industries usually have a shorter gestation period than large industries. This helps the entrepreneur to earn after a short period of time. Capital will not be blocked for a longer period.

Workplace Culture

Small businesses have fewer employees. Employees of small businesses are less specialized than in larger businesses. In larger enterprises, employees have specific job descriptions, but in small businesses, employees are more often expected to help with a variety of tasks because there are fewer people to do everything.

FAQs About the Characteristics of Small Scale Business