Small Enterprises: Meaning, Importance and Problems

What Is Small Enterprises?

The business enterprise which operates on a smaller scale, compared to the large scale business and has a limited number of employees, resources and capital is known as Small Enterprises. Small Enterprises also known as Small Business or Startups.

Small Business or Startups can be found in various industries like, retail services, manufacturing, technology and more. These types of businesses are often independently owned and operated by small groups of individuals and entrepreneurs.

Importance Of Small Enterprises

Large Employment opportunities

The first and primary importance of small enterprise is its capacity to create large employment opportunities. It uses labour intensive techniques to carry on its business operation and solves the problem of employment faced by the Indian economy. It also creates a huge number of employment opportunities and works as a powerful tool of job creation in india.

Economically use of capital

The economical use of available capital is considered as another importance of small enterprises. Generally it provides quick return or investments due to a shorter period. It also ensures economical use of limited capital most effectively.

Balanced Rational Development

The development of small enterprises encourages decentralisation of economic power. It helps in removing rational difference by setting up industrial units in rural and backward areas. It ensures balanced Rational development and improves the standard of living.

Mobilisation Of Resources

Another important development of small enterprises is to mobilise and utilise local resources most effectively. This industries not only helps use to local resources but also generate employment opportunities such employment helps to get source of income and increase their standard of living

Promotes Exports

It is proven that small scale industries contract over the years. It encourages the production of various products in huge quantities, then the domestic requirement which is easily exported and enables the country to increase to foreign exchange. It also helps to reduce the pressure or balance of payment.

Support to large industries

Generally the growth and development of large scale industry depends upon small industries. They are playing a vital role by providing parts, components and accessories in the country of large scale industries, so small industries are considered as ancillaries to large scale industries.

Social Advantages

The development of small industries ensures the development of the socialistic pattern of society. It also enables local people to increase their income and lead an honourable and independent lifestyle.

Protection Of Environment

The protection of the environment reduces the problem of pollution to a large extent. It aims to carry on all its activities by using physical workforce rather than chemical technology.

Standard Of Living

Another importance of small enterprise is to increase the standard of living of local people. It helps to increase national income and purchasing power of people in rural and semi urban areas that indirectly helps the people increase per capita income and lead to a better standard of living.

Other Importance

The development of small industries not only provides above limited advantages. It also has a number of importance to its local people some of the other importance:

  • Development of better industrial relations.
  • Provide benefits of improved technology.
  • Promotion and development of entrepreneurship.
  • Facilitates in equitable distribution of income and wealth etc.

Problems Of Small Enterprise

Problem Of Finance

The primary problem of small enterprise is to arrange required finance from there own sources which is considered as life blood of every business unit generally they arranged finance from unrecognised financial sector at a higher rate of interest such problems arises due to:

  • Security of financial resources
  • Poor Credit worthiness of small resources

Problem Of Raw Materials

Another problem faced by small enterprises is related to procurement of raw materials. They also fail to maintain adequate stock and provide required material in time.

The other problem relating to raw material are:

  • Availability of inadequate quantity
  • Poor quantity of material
  • Irregular supply from material
  • High cost of material etc.

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