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Small Entrepreneur's Main Characteristics and Problems
Sent: 01 October 2012

1. Characteristics of Small Entrepreneurs

In a normal environment a small business in Indonesia will possess the following characteristics: 1. The operational management and business administration are frequently handled by one or two people who make general decisions; 2. The manager is the owner of the enterprise; 3. The capital is very frequently her or his own or owned by another larger enterprise (“Foster Parent” system); 4. Its area of operation is generally local; 5. Its business field is relatively small when compared to those of large-scale businesses, also in relation to its manpower, assets, turnover sale, etc.; 6. Its products are commonly sold directly to ultimate users and not via intermediaries or agents, except handicraft products.

Nevertheless, characteristics of special conditions found in certain regions can be added to the six characteristics above-mentioned. As seen in the essence of an enterprise, the functions of an entrepreneur can be classified into different fields of activities, such as those associated with profits and new combinations, evaluation of contained profits, technology, planning, and development of production sites, efforts of seeking, obtaining, and making use of opportunities, education, and managing human resources, negotiation with government or related institutions, suppliers, and customers.

What is more determining is the condition in which entrepreneurs can succeed in controlling and organizing a process of innovation – also in delegating the functions to their employees/staff, development agents, or even “market”, so that a new combination can be created. S/he can be called an entrepreneur since in her or his activities s/he takes some “interest” in the form of profits.

In reality, however, such thing is rarely found in small business circles in Indonesia since they handle many tasks and responsibilities themselves for efficiency reasons. They are more organization-oriented or concerned with the internal affairs of the organization than do they consider effectiveness, performance, and results coming from outside the organization.

What people are successful in new small businesses? There are three characteristic types of entrepreneurs in Indonesia: 1. those that consider that small business is an important way to self-advancement; 2. those with practical skills but often poorly educated, who are something of a misfit, spurned authority and do not fit easily into wage employment, and who are seeking independence and improved job satisfaction above all; and 3.  those who are jobless during the recent crisis. For the first two of these groups small business is a sort of social rebellion rather than something forced on them by the need for employment, but the third group is the jobless who need to setup field of work, they have been forced by the monetary crisis.

More and more start-ups are being achieved by unemployed people who see this as the only way to long-term employment. This type of new-starters are so many found since the crisis 1997 up to now in Indonesia. They are in a difficult position, especially if they have been out of work for long, as they may have problems of finance, of confidence, and of work discipline. The majority set up business in the industry and product areas with which they are most familiar, though for most it is their first experience of setting up a business. If these areas are in declining industries, they may encounter immediate problems. This group of starters is likely to be thinking of the possibility of starting a small business.

The last few years have seen many people retiring early, sometimes with money to invest. They face slightly different small-business problems: they may not want the clock-round involvement and pressure of a new start-up, and they want to avoid an expensive failure.  A common route is a hobby-based business that brings in some income.
My consultant company has many clients coming from all these groups.


2. The Main Problems

Small Business Work and Its Process of Development

2.1. Stages in Business

It takes considerable time to establish a viable business, and this has bearing on overall success rates and the periods when the business is at risk. The first step is the business idea. Original and novel types of new businesses involve more work, are riskier and take longer to set up than the standardized ones.

In developed countries the standardization of products is decided and fixed, such as products of bakeries, several degrees of the replication of which may take place. In developing countries or the third world, there is no standardization of small businesses’ product quality. Standard is natural and standardization should be made to enable products to possess more competitive quality in markets than that of the competitors. However, even where it is possible to get considerable advice, there is still substantial risk involved in the set-up.

It is illegal not to inform the Inland Revenue of business operations, nevertheless a large number of small businesses start up this way, principally because tax avoidance cuts costs dramatically in early years.

Once the idea is formalized, the small business can begin. At this stage money is being spent on premises, equipment, materials, labor. There is likely to be a net loss sustained during much of this start-up period. The next phase covers the early growth period when markets are established, production geared up, and, if successful, new staff taken on. During this period, which can last several years, a net profit should be achieved or else action must be taken to restructure the operations. Repayment may be started on the firm’s debt, though increased finance may still be necessary for new capital investment. However, during this phase there are still substantial pitfalls for the firm, often due to over-rapid expansion.

During the phase of consolidation and mature growth or stability, the enterprise is geared up to an optimum scale and operating scale is very small, this face is reached fairly quickly, but in relatively large business it is only during this phase that the revenue from the business begins to realize any realistic return on cumulative investments.

2.2. Failures

This profile of a viable new enterprise must not obscure the stark fact that about a half of business start-ups will fail before they reach this mature phase. The first dangerous period is very early on, when ill-conceived business plans come unstuck. The risk of business failure is high during the first six months, very high the next 12 months, then still high (but declining) over the following 12 months. However, those businessmen or women who undergo start-up training courses or obtain proper counselling and advice can cut these risks significantly, showing considerably better records of survival.  The important thing is the firm should be an innovative and effective organization.

The first change policy, therefore, throughout the entire institution, has to be Organized Abandonment.  Abandonment is the right action if a product, service, market or process ‘still has a few good years of life’. It is these dying products, services or processes that always demand the greatest care and greatest efforts. They tie down the most productive and ablest people. But also we almost overestimate how much ‘life’ there is still in the old product, service, market or process. Usually they are not ‘dying’; they are dead. The case where abandonment is the right policy-and the most important one-is the old and declining product, service, market or process for the sake of maintaining which, the new and growing product, service or process is being stunted or neglected (Drucker, Management Challenges of 21st Century).

The result of sample observation in Indonesia showed that 10-12 percent of businesses underwent failures in the first six months, and 30 percent of the businesses could not finish the first year. In reality, the percentage could be far higher since there were many businesses that were unregistered. However, the entrepreneurs that had taken courses on “business management” or those that had obtained quality suggestions and consultations were able to cut or set aside these dangerous risks and showed significantly positive evidence for the sustainability of their businesses. Therefore, external supports and assistance of several professional Non-Governmental Organizations (NGOs), cooperatives (economic enterprises), and other institutions that are really high quality have been proven very beneficial for the sustainability of these businesses.

The following crisis may emerge in the early phase of development. The degree of failure is far lower this time than before, though there are still problems that are caused by exceedingly fast expansion: 40 percent of businesses could not finish their first ten years. Crises also take place when small businesses should adjust themselves with some new conditions or unexpected problems caused by recession or socio-political and economical crises, strikes, changes of exchange value, customers’ bankruptcy, industrial contractions, and changes of laws and legislations in a negative sense. There are still many other factors that may “hit” new businesses. To a certain extent, these risks cannot be avoided, but experts’ suggestions (consultation assistance) in an early phase will be able to reduce or minimize the costs of failures. The hazards of failures are somewhat different one from another in accordance with kinds of businesses.

Franchise, a business practicing a standard pattern, can very frequently be established faster and steadily possess better opportunities to gain success (than do other businesses); therefore, it constitutes a favorite among circles of the inexperienced beginners: two-third of those who practice it have not possessed any business experience and others who do it once experienced business failures before. For them, franchise can offer safety degree of their business sustainability that is above average. What is not so beneficial with it is that it relatively requires a high cost to establish, sets requirements of repayment, and is tied with a string of certain operational patterns.

2.3 Problems of Small Business Credits

The difficulties in acquiring small business credits often become one of the obstacles in establishing a new business or developing a small business. As a matter of fact, there are thousands of entrepreneurs that possess growth potentialities but lack capabilities of getting through the obstacles that separate the traditional economic realm from the modern one. They own potentialities, yet the available system does not support them to develop. This takes place due to the following causes. First cause: the modern/formal monetary agents do not really comprehend the arts of practicing small businesses well: what their daily difficulties are, what steps should be taken to survive and succeed in unfriendly environments, how they communicate with clients, how they can be convinced of selecting clients that are not only reliable but also prospective, and how they evaluate business ideas that are potentially successful. Second cause: bank circles consider that credits given to big businesses are more efficient in terms of energy and monitoring time and more beneficial for their banks than those for small businesses; yet, this theory eventually turns out to be untrue since it has been proven that many entrepreneurs of big businesses are unable to pay their debts during the monetary crisis; whereas, those of small businesses can hold out. Third cause: the present monetary crisis has made banks more careful in giving credits to entrepreneurs of small businesses, let alone to new clients and founders of new businesses that are considered as possessing high risks in this uncertain socio-political and economical situation Fourth cause: entrepreneurs have neglected many professional topics in business management, such as the production capacity that has been mixed up with sale volumes, strategies to enter a market is always synonymous with high-quality but low-priced products, market opportunities that are overestimated, financial feasibility that is computed and included as a gift, sales that are mistakenly considered as incomes, pre-operational cost that is not calculated, salaries and overhead that are not calculated precisely. Many have gone bankrupt because of loans and wrong business ideas.

Nevertheless, there are positive aspects that have been found, especially in relation to the small and micro businesses in Indonesia that have succeeded in maintaining their business sustainability in the hard and in-conducive situation within these five to ten recent years. This is because they have naturally “experienced the vagaries of life”; therefore, they have proven that they can survive during the crises. Nature has trained them to become very hard to defeat besides their small scales that have enabled them to adapt to the monetary crisis hitting Indonesia.

Many bankers and economists have thought that poor people will not be able to save and do not possess any capacity for managing their finance well. This thought is not absolutely true. Contrary to it are the NGOs’ experiences in rural practices in this field that have shown their willingness and desire to save are very high because they are very concerned with the need fulfillment of reserves. The keys to success, among others, are clarity of a program and guaranteed safety and continuity of it so that the trust of people serving as support can be obtained.

Invention-based businesses. At the other end of the spectrum is the high-risk but very original business based on a product or process developed by the owner. There are many attempts to build entrepreneurial businesses around new inventions, but they almost inevitably run into problems of product development, production gearing-up, finance, and marketing.

3. Market Research

Decisions related to products that are offered are usually based on real or potential customers’ acceptance or need expressions. Entrepreneurs should evaluate whether or not there is an adequate number of people who are going to purchase their products before deciding to invest their funds on anything. This can be clarified through a market research the procedure of which may cover the following steps: 1. Determine the boundaries of market or trade regions. One of the strategies, for instance, is by determining a map of a relevant region and competitors’ boundaries. To decide whether or not a region is suitable, it is better to know approximately how many people need services/products of each business, in a special field of a certain business, because there are economic boundaries in a certain market region that are determined by several factors, such as distance and transportation costs; 2. Study of population in a certain market region. A population size is very crucial although it does not guarantee that there will be a certain adequate number of types of consumers (especially in relation to their needs and buying power). A growing population generally constitutes a better market than a stable or decreasing one. An analysis of population characters may even be more crucial than its size. In this case, the relevant factors include gender, age, income, job, marital status, average size of family, religion, and level of education. For example, a bookshop will possess better prospects in a certain marketplace/region when its population possesses an average higher level of education than that located in a market region with a population that possesses an average lower level of education. 

An entrepreneur should further pay attention to the habitual characteristics of a population in her or his market region. Do they need a product daily, monthly or only rarely? Do they buy a product because of their impulses or because they have evaluated the differences of similar products (competition)? Do they buy a product because it is really useful for them or because they are only eager to satisfy motivation of their psychological desires or statuses? 3. Determine the present sale volumes for a certain business. From the characteristics above- mentioned, a market researcher can make estimation on a number of demands for a certain product in a certain market region that can be expected. 4. Determine how great a sale volume can be attained by a certain enterprise. It can be assumed that a certain new business will only have small impacts on buying power in a certain market region or in the distribution of consumers’ expenditure or spending. To be eventually more established, it should be based on the portion formed from the existing sale volumes or something else can be worked out, that is “taking over businesses from the competitors’ hands” meaning that the entrepreneur should face competitors and compete directly.

Research can help understand the buying process. Consumer research is a major tool in helping make the buying process theory useful. Research can show a marketing director where s/he has succeeded and where her or his efforts need to be redirected. Research is valuable because it can be translated into tangible marketing actions. Before you embark on research, you must ask yourself: “What specific questions do I need to answer?”. “How am I going to use the information once I have it?”. If you have not thought through these two simple questions, you will probably waste your time and money.  Is the product a high- or a low-involvement product? If the consumer feels a high level of “risk” in buying a product, then it is considered a high-involvement purchase decisions: High price, The Need For the Product’s Benefit, and The Need for the Product’s Psychological Reward.  (The Ten Day MBA).

In a normal situation a new supplier will not be so beneficial when compared with those already existed. This is especially due to the fact that they lack contacts/relation, regular customers and capital. An error one commonly makes is when s/he convincingly predicts what s/he can sell by connecting several general figures with a market measurement and then projecting the market for her or his own business. Therefore, a more careful analysis is needed. As an alternative, a market research can be done with a low cost and by a small entrepreneur her- or himself that is by: regularly maintaining relations and propinquity with consumers – observing their habits of consumption and meeting with other producers, informally or regularly, discussions with suppliers and retailers, and catalogues of businesses and industries. Inaccuracy in her or his business research very frequently causes business operation to lead to fatalistic and wrong strategies. A research that is done meticulously and highly accurately is needed.

Small entrepreneurs in Indonesia are often economically demanded that they execute businesses immediately, which frequently leads them to make mistakes in their researches and evaluation. Business consultants and researchers are badly needed to assist them in this matter.

For consultants or business researchers, puzzles are solvable problems that may be clarified or resolved through reasoning.  Every day we reason with varying degrees of success and communicate our message, called meaning, in ordinary language or, in special cases, in symbolic, logical form. Our meanings are conveyed through one of two types of discourse: exposition or argument. Exposition consists of statements that describe without attempting to explain. Argument allows us to explain, interpret, defend, challenge, and explore meaning. Two types of argument of great important to research are deduction and induction.

Induction and deduction are used in research reasoning in a sequential  manner. It describes this process as the double movement of reflective thought. Induction occurs when we observe a fact and ask, “Why is this?” In answer to this question, we advance a tentative explanation (hypothesis). The hypothesis is plausible if it explains the event or condition (fact) that prompted the question. Deduction is the process by which we test whether the hypothesis is capable of explaining the fact. (Business Research Methods, by Cooper and Schindler)
The risk of business failure is could be minimized for those businesspeople who undergo start-up training courses or obtain proper counseling and advice can cut these risks significantly, showing considerably better records of survival.

4. Facing Competition

It is suggested that new-starters that have just entered a market avoid direct competition with already established businesses; instead, they had better pay more attention to taking opportunities or filling existing market gaps. When their businesses become more established, they can compete more directly with competitors. Small entrepreneurs in Indonesia experience a lot of challenges in the development of this era, not only on how to survive but also on their self-preparation for being able to compete in the global market.

Marketing

Marketing is an effort to make people want your goods, sell them, and transfer them to buyers and obtain payment in return. In other words, what need be done daily to increase sales are:  -strive to know what customers want; -select products or services that you can offer to satisfy their needs; - produce economically; -determine the prices; -promote them; and –distribute them efficiently and effectively.

The marketing process is a circular function. Marketing plans undergo many changes until all the parts are internally consistent and mutually supportive of the objectives. All aspects of a proposal need to work together to make sense. It is very easy to get one part right, but an internally consistent and mutually supportive marketing plan is a great accomplishment. It’s a seven-part process:
  1. Consumer Analysis
  2. Market Analysis
  3. Review of the Competition and Self
  4. Review of Distribution Channels
  5. Development of a “Preliminary” Marketing Mix
  6. Evaluation of the Economics
  7. Revision and Extension of Steps 1-6 until a consistent plan emerges
Buyers many times are different from users. Determining the buyer as well as user provides the essential initial insights to create a marketing plan. (The Ten Day MBA, Steven Silbiger).

Most of very small businesses offer their products and services to ultimate users.
This is due to the small scale and scope of their operational area. Intermediaries or agents, therefore, are not needed to deliver them.  Special characteristics of very small businesses include their direct contacts with their customers who possess low or moderate incomes, especially farmers (peasants) and those living in urban areas. Marketing via exports is generally uncommon, except for few modern small businesses and some handicraft products that are often marketed through governmental and private institutions or handicraft kiosks and NGOs. They sell the products to tourists or directly abroad.

Why do small entrepreneurs frequently face marketing problems? In a narrow sense, small entrepreneurs cannot stand the prolonging problems of marketing too long. When small enterprises cannot sell an adequate amount of their products in a certain period of time, they will tend to go bankrupt, except there is a miracle in that there is a third party that is willing to pay the bill onus of their expenditures. A great number of small businesses suffer due to marginal incomes or inability of expansion.

There are several factors that positively or negatively affect market opportunities of small businesses.

Strengths

  • Number of contacts made with customers and personal services
  • Lack of transportation costs due to the close distance to customers or suppliers of raw materials
  • Unceasing responses toward new challenges and opportunities of growth
  • Flexibility of operation and lowness of overhead costs
  • An adequate amount of products that are produced with low costs and fast rotation

Weaknesses

  • Lack of innovative ideas
  • Lack of research and planning ability
  • Lack of funds for innovation and expression
  • Lack of information, not many potential customers that know the products being offered
  • Inability to offer products in an adequately great amount or in consistent quality
  • Cost of product promotion via media that is higher than sale volumes

Opportunities

  • Rise of urbanization and population growth
  • Ineffectiveness of huge scale businesses
  • Lack of infrastructures in rural regions

Threats

  • Extreme hurly-burly of trading in which level of competition is high
  • Levels of profit and turnover that are frequently low
  • Competitions among big sale businesses that generate inexpensive products for consumers
  • Stagnation of agricultural sectors

Thus, what can be done to increase sales? There are several internal solutions that small businesses can make and that are associated with: the philosophy of marketing, market research, that related to competition, price and credit decision, promotion, and collaborative action. Besides, there are external challenges the risks of which can be reduced with the assistance of external agents (NGOs, government) in the policy or program level, such as: government policy on trading, business registration, sharing tasks with other parties, usually called subcontracting, export promotion, and business information.

Selling and distribution costs

Consumers will evaluate the alternatives. Which one is best for me? This includes not only products within a category, but also substitutes. Depending on the importance of the product, consumers may seek additional information and advice. At this stage of the buying process the marketing manager is eager to identify the influencers of his target’s buying behavior. Distribution is also crucial at the evaluation stage of the buying process. If a product is not readily available, a comparable substitute may be chosen just for convenience or immediacy of need (The Ten Day MBA).

Income generation occurs only when there is sales revenue, a consideration obvious enough, nevertheless often overlooked by entrepreneurs that fund production units without undertaking a market feasibility study.  In order that sales can be achieved, costs will be incurred. These will depend on what the selling method is.

There may be promotional leaflets or catalogues, travel expenses to visit customers or sell in the marketplace, a commission payable to a sales agent etc.  Selling and distribution costs are part of the overheads of a production unit. They may be variable, for example, a sale commission, or fixed, such renting a space in a monthly exhibition. The important thing to remember is to calculate them and include them in the costing analysis in the same way as other overheads. Very often small businesses overlook them, because they have not evolved a selling strategy, and then find that they cannot afford to incur the expenditure necessary for marketing. The onus to sell products is on the production unit; it should not wait for people to visit, but rather go out and find customers, and be confident that there is some margin in the costing for doing so.

Current theory holds that personal selling is a problem-solving and consultation process. Salespeople should sell benefits that solve customers’ problems, rather than simply peddling products. (The Ten Day MBA).

Ways to reduce costs

The objective of a social production unit is to maximize the earnings of the producers. This emphasizes the need to seek all possible means to keep other costs to a minimum. A number of possibilities might exist, and should be considered.

Cost Calculation, Pricing Decision and Customers’ Credits

Cost Calculations. Everyone who touches the merchandise takes a cut, which is called margin. Channel participants in most industries calculate their cut as a markup on selling price.  The margin is not based on cost. (Ten Day MBA).

Percent Markup on Selling Price (SP) = ($ Markup / $ Selling Price) x 100

In case of industry, a producer must know the answer of the following question: How much do the products cost to produce? Two types of costs are involved in production: direct cost. The main direct costs in industry are labor and raw materials. Indirect costs (also called overheads) are all the other costs incurred in the production unit, for example rent of workshop, administrative salaries, bank interest, etc.  Obviously all costs, both direct and indirect, have to be covered if a production unit is not going to make a loss. First, if necessary, the following two questions should be taken into account: What are all the costs involved in production? And, How should the indirect costs be allowed for in the cost of each product?

Costing provides the basis for pricing, and if costs are included which have no direct relationship to the production activity, then there would be little hope of achieving a competitive price. There are many examples of well-meaning enterprises who have tried to fund welfare schemes out of profits but have not generated sufficient profits to meet the cost. Because of inadequate accounting system, they have often been unable to separate their different costs, and have failed to identify where difficulties lie, and whether production itself is profitable.

It is assumed here that the production activity will have the objective of at least breaking even.
The pricing decision, like the product decisions, can dramatically affect the marketing mix (Product, Price, Place, Promotion) by suggesting a channel distribution or an advertising strategy. The pricing itself can differentiate your product from the competition.

Fixed and variable costs: All direct costs of production are variable costs, because obviously the total expenditure incurred varies according to which product, and how much, is being produced. The same is true of some indirect costs. For example, the supplier of one raw material might demand cash on delivery, necessitating the provision of a bank loan, while others might give 30 days credit. Supervisory staff may be employed for some production processes but not for others. It is helpful if a business can distinguish these variable costs from fixed costs, which will not change whatever the production activity: such things as the rent of the workshop, the telephone bill etc.

The purpose of the costing exercise is to obtain as accurate a record as possible of how much products cost to produce. This is for the purpose of not only pricing, but also monitoring the efficiency of production, gaining knowledge of the different profitability of products, and making decisions about what to produce.

Variable overheads should be allocated to the cost of the product in just the same way as direct costs, by identifying as closely as possible the relationship between quantity of production and expenditure incurred, to yield a unit variable overhead cost.

Overhead absorption rate: It is the apportionment of the fixed overheads that gives most difficulty. Here the objective is to treat as part of the cost of the product all of the other expenditure incurred in the production unit, although this has no direct relation to the product itself. The method used is the calculation of what is called an overhead absorption rate.

Overhead absorption rate = Fixed overhead cost / Level of production activity

Whilst this is the same basis as the calculation of direct and variable indirect costs, there are two difficulties.

Production level: The recovery of all fixed costs is critically dependent on attaining the estimated production level. If this falls below estimate, the fixed costs would clearly not be covered. There is no solution to this difficulty, which is more acute for a new business without sales experience. The only possible approach is to make the best estimates of what will be produced over the accounting period for which the fixed costs are identified, and to keep a careful watch on results. In a small handicrafts unit, fixed overheads are generally low. Indeed, there can be no better advice for a new enterprise than to keep them absolutely as low as possible.

Individual product apportionment: It is unrealistic to apportion the same amount of overhead to each product, regardless of its variable cost. Therefore a suitable basis has to be found for individual apportionment. In specific type of industries, this could be done on the basis of labor hours taken in the production of each item. Thus the estimated level of production activity in the total period would be expressed in terms of labors hours, and the formula above would yield the overhead absorption rate. This rate would then be multiplied by the number of hours taken to make each item to give the individual product fixed overhead apportionment.  
The advantage of this method is that it does not matter which products are produced. As long as overall production reaches the estimated level, the cost will be covered.

If costing is a fairly precise, pricing is much less so. This is because the price obtainable for a product is that which the market is prepared to pay. It is of absolutely no use to complain to a customer that a product costs a certain amount to produce, if the customer perceives its values as less than that, and is not prepared to pay more.

This is not to devalue the costing exercise, which is the fundamental requirement for a production unit, and its relationship to pricing will be looked at. Nevertheless, it is necessary to separate the concept of cost from that of value. Price will ultimately be governed by the value of the product, not its cost. Where cost exceeds value, profitable selling cannot take place.

Penetration often used in the introductory phase or later in the PLC. A penetration strategy would use a low price to gain market share; the goal is primarily to lower costs per unit by producing many units in hopes of eventually controlling a market as the low-cost producer. Other pricing methods that might be used are The Price/ Quality Relationship, Meet Competition, Meet Profit Goals Based on the Size of the Market, and Price Based on the Price Elasticity of the Buyer (The Ten Day MBA).

New comers in a market are frequently convinced that they can “bite” their competitors by practicing price-cutting that reaches below the market price. This can become a blunder causing high costs. A new comer in a market is justified to carry out price war only when price really constitutes a factor that determines the decision of a certain purchase and when the entrepreneur really possesses flexibility to carry out the price-cutting, for instance, due to the adequately low production costs (inexpensiveness of the raw material supply s/he attains), labors’ low wages, relatively low production costs, etc.). Therefore, it is better for her or him to adjust the prices with consumers’ demands. The more successfully a business offers innovative products and added value for profits, the more rooms it possesses to fix prices independently. Selling on credit is one of the marketing techniques. Not all buyers possess cash money; therefore, the demand of a product and service will increase when there is a possibility for customers to obtain the product or service immediately and to be permitted to pay for it later. A sale on credit, however, arises business risks. Careful selection of would-be customers is highly required. If necessary, credit limitations are to be determined separately for different individuals, and these should be in accordance with their capability of returning their credits.

Promotion

The number of demands on goods and services offered by a business can be classified into: - definite market demands, in which sale volumes will take place without the necessity of promotion out of the enterprise, and –demands, acquired after being created or promoted, in which sale volumes are as the result of certain activities to attract buyers’ interests in the enterprise’s offers; - promotional actions generally cover: advertising via newspapers, radios, yellow pages, direct letters, pamphlets, leaflets or brochures, etc.; - publication, also a kind of advertising but without paying. Notification to public by an owner in relation to her or his business; - special events or programs; - personal services in sales (know the benefits of your products and sell them attractively using personal services); - work out a relation with consumers; - services to customers; -product exhibition, product packages or product appearance and attractive ways of packaging.

Promotional actions should be taken positively and compatible with enterprise size and sale volumes. Generally production volumes of many small businesses do not economically possess opportunities to make use of mass media. The other reasons why promotional actions are not taken are due to the lack of capital to meet enterprise expenditures and at times there are people who believe that it is due to the un-elastic market situation for them, or to the lack of knowledge as to the strategies applied to execute a certain program and design for a certain promotional program.

Skills of Entrepreneurs

There are three crucial types of skills that should be possessed by entrepreneurs to be successful in businesses. They are as follows: - work skills (technical, commercial, and professional); - managerial skills (needed for finance, materials, human resource administration that is handled by a manager, especially in calculation and technological production, etc.); and – entrepreneurship skills, very crucial skills for controlling activities with which a manager is able to make a decision that s/he needs few/little or even there is no direct control at all on competitors, changes or opportunities, policies or regulations. At an institutional level, a question that is raised is: Which institutions are able to provide the precise and best assistance when needed? To be effective executives, entrepreneurs should possess the three primary skills.

To be effective is the job of executive. “To affect” and “to execute” are, after all, near-synonyms. Whether s/he works in a business or in a hospital, in a government agency or in a labor union, in a university or in the army, the executive is, first of all, expected to get the right things done. There are many managers who are not executives. Many people in other words, are superiors of other people – and still do not seriously affect the ability of the organization to perform (Drucker, The Effective Executive).

These are the challenges that should become the concern and attention of small entrepreneurs today. Globalization and changes cannot be avoided; therefore small entrepreneurs should be able to make adaptation, innovation, and changes.

Environment

Most of managers develop their skills through a process of failures and successes they experience. “What” have occurred behind their failures and successes can be easily understood via an illustration of a development model covering three basic components that have impacts on enterprise operation. The three components are: - the entrepreneurs themselves; - the institutions advocating or working for them or even those opposing them; and – the environment in which they operate.

Environment is also a determining factor in the development of small businesses. What is relevant in this case is the policy aspect that comes from outside the business, but that can affect its operation, such as legislations that protect small businesses or are anti-monopoly, taxation, export and import policy, credit facility, financial system, and so on. One thing that is very necessary and likely to do is to design and apply policies to support the development of small businesses.

LITERATURE

  1. Cooper and Schindler, Business Research Methods
  2. Peter Drucker, Management Challenges of 21st Century
  3. Peter Drucker, The Effective Executive
  4. Steven Silbiger, The Ten Day MBA



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