Issues in Small Business and Entrepreneurship

This literature review discusses the major challenges and issues faced by small businesses and entrepreneurs in managing their businesses. It explores the strengths and weaknesses of entrepreneurs and the importance of strategic management. The challenges discussed include management of money, lack of technology, lack of marketing expertise, customer retention, quality issues, lack of skilled personnel, and lack of monitoring performance.

Issues in Small
Business and
Entrepreneurship
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Table of Contents
Introduction.....................................................................................................................................3
Main body........................................................................................................................................3
The personality characteristics of entrepreneurs to business growth in small firms..................3
Issues and challenges prevailing in small businesses and entrepreneurship...............................5
Conclusion.......................................................................................................................................7
References.......................................................................................................................................9
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Introduction
Entrepreneurship is the process of applying skills and expertise in the field of business to
create value for consumers for the purpose earning profits and wealth. Entrepreneurship is a
skill and is quite challenging profession as it requires high expertise and experience in order to
perform the functions of management effectively and efficiently. Entrepreneurs and small scale
businesses are often challenged in numerous areas including arranging and accessing resources
and finances. In the following literature review, analysis and evaluation of strengths and
weaknesses associated with personality attributes and traits of entrepreneurs are discussed. In
this literature review, the major issues and challenges are identified which are faced by
entrepreneurs and small-scale businesses in establishing and managing their businesses.
Main body
The personality characteristics of entrepreneurs to business growth in small firms
Entrepreneurship is a skill which is associated with establishing an enterprise and
collecting and assessing various physical and financial resources. An entrepreneur is a person
who initiate a new business plan and risk his personal savings in order to allocate the resources
to start his venture. The process of entrepreneurship is quite challenging and the ability of risk-
bearing is what increase the chances of success for an entrepreneur. Entrepreneurship must have
some attributes and qualities which are required for growth and development of its small-scale
enterprise (Morozova, Popkova and Litvinova, 2019). Entrepreneurship is associated with
developing a small-scale venture which over the time can grow and expand with huge
investments and capital addition. Following are the strengths and weaknesses of an entrepreneur
linked to small business growth:
Strengths of an entrepreneur
Bold and open-minded: One of the major attribute of an entrepreneur is characterised by
his bold and open-minded attitude which ensures that how effectively he would be able to grab
an opportunity (Huarng and Yu, 2021). An entrepreneur must keep his mind open in applying
new ideas and should not restrict or limit the possibilities through maintaining a conservative
attitude. In order to run business through exploration of opportunities, small-business owners and
entrepreneurs must maintain bold and open-minded attitude enhancing their chances of success.
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Practical and Hard-working: An entrepreneur is able to successfully initiative a venture
through his hard-working attitude. Moreover, an entrepreneur must follow a pragmatic approach
in the course of doing business as practicality is highly important trait in growth of a small-scale
business venture. An entrepreneur must be hard-working or they face issues where they are not
able to earn any revenues due to lack of passion or negligence.
Risk-bearing capacity: It is highly crucial for an entrepreneurs or a start up to initiate the
process of business keeping in mind the factor of risk. Entrepreneurs having high risk-bearing
abilities are likely to achieve huge success and progress in longer run. However, the risk taking
attitude without doing any research or thinking the long term consequences sometimes becomes
the cause behind downfall of a small-scale business (Haldar, 2019).
High networking and interpersonal skills: An entrepreneur must be sociable and must
possess high interpersonal skills in order to maintain healthy relations with all major
stakeholders. An entrepreneur who fails to manage relations with investors, consumers and other
stakeholders like suppliers and creditors are likely to fail a start-up due to lack of support from
stakeholders.
Weaknesses of an entrepreneur
Emotional and Impatient: The emotional attitude of an entrepreneur must be highly
avoided in the course of establishing or managing a small business or during the course of
entrepreneurship (Jones and et.al., 2019). Small businesses and entrepreneurs often face many
challenges and bear major losses during the course of business and maintaining an emotional
approach during such is what cause them to shutdown or wind up their businesses.
Lack of decision making: An entrepreneur must have high decision making skills as he
is responsible for taking all decisions and confusion and lack of clarity often leads to chaos in
business. Small-business owners or entrepreneurs have to make choices regarding various areas
of management of operations of business and thus they must be observant and take decisions
after thoughtful analysis and should not make decisions in hurry without considering long-term
consequences.
Mismanagement of resources: An entrepreneur must be able to manage his resources
effectively as small firms often face the challenge with proper accessibility and availability of
resources (Turner, 2018). Hence, the scarcity of resources make it a top criteria that all the
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available resources are to be managed properly or else the business must face downfall or
closure.
Lack of innovation: Entrepreneurs must be highly innovative and creative in order to
attain success and growth in small businesses. Entrepreneurs have limited resources and
therefore they can excel in areas of business through innovative and customised ideas. Lack of
innovation leads an entrepreneur towards steady growth resulting in losses.
Issues and challenges prevailing in small businesses and entrepreneurship
Small-scale businesses refers to an enterprise having few employees, small management
and less revenue generation as compared to multinational companies and regular sized
corporations or businesses. It may be a privately owned enterprise, partnership or sole
proprietorship (Sultana and Jimoh, 2021). According to UK companies act 2006, a small
company is the one having turnover less than £6.5 million and balance sheet total less than
£3.26 million and having employees less than 50. small-scale industries plays a significant role
in overall development and growth in economy of UK. SME's contribute for approximately
51.9% in private sector turnover in 2020 and supported 53.6% of all private sector employment
in the UK making a total of 22.9 million jobs. The contribution of Small businesses are major in
growth of world economy and it provides million job opportunities to a range of individuals.
Small businesses are challenged by a range of issues and the problems faced by them are
multidimensional due to which entrepreneurs and these enterprises are facing downfall or decline
in their businesses. The major issues and challenges of small businesses and entrepreneurs are
discussed below:
Management of money: An entrepreneur have to arrange and manage all the financial
resources on his own or with little or almost no support of finance experts. Moreover, small
businesses have lack of high financial expertise and it becomes hard for them to properly
manage finances and allocate resources accordingly in constructive manner. Arranging finances
is one thing but managing them in the long run is a challenging task and small-scale businesses
and entrepreneurs face issues in this area (Sasongko and Bawono, 2021). For the proper
management of cash outflows and inflows, book-keeping expertise is required as the business
grows.
Lack of technology: Another major challenge and issues that is faced by small
businesses and emerging entrepreneurs is lack of technical expertise or access to high and
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modern technology. The final turnover of small-scale enterprises are less and entrepreneurs have
lack of experience in initial phases of their start-ups due to which it becomes hard for them to
avail highly modern and expensive technical assistance. Use of modern technologies are tend to
make products or services of an enterprise highly unique and customised. Moreover, it increase
production capacity and reduce the requirements of personnel and manual labour therefore
increasing possibilities of high profitability margins (Ballesteros-Ruiz, Cardenas-del Castillo and
Corrales-Estrada, 2019). Lack of access to high technology make it a challenging task for small-
scale entrepreneurs to conduct the process of production with high productivity and potential.
Lack of marketing expertise: For the purpose of increasing brand awareness and
maintain a high customer base, it is required for entrepreneurs and small-business owners to
highly promote their operations and products in the market. The process of marketing and
promoting products is expensive and is associated with innovative techniques and methods in
which small business owners and entrepreneurs have less expertise and knowledge. The process
of marketing is associated with advertising which comes with large investments and involves
huge costs. Therefore, it becomes challenging for small business owners to attract a large base of
customers towards them as people are less aware about their existence due to lack of marketing
efforts by them. Moreover, effective marketing of products requires personalised and qualified
marketing professionals and small-business have lack of these specified departments. Therefore,
the lack of awareness of their businesses is a constant problem which makes them vulnerable to
uncertainties (Depken and Zeman, 2018).
Customer retention: The problem of attracting high base of customers already exists in
the course of small-businesses but their retention is another major aspect creating issues and
challenges. Ensuring customer retention is quite difficult for small business owners due to their
lack of prestige and less or almost no recognition of brand image in the market. Therefore, they
are faced with the problem of fluctuations in revenues and profitability margins as their
customers keeps shifting their preferences (Barbosa, Castañeda-Ayarza and Ferreira, 2020).
Mostly small-business owners or entrepreneurs are not tend to offer any innovative or unique
product or service and due to absence of high branding techniques they face the consequences of
less customer retention and thereby their profitability margins are highly affected.
Quality issues: Small-business owners or entrepreneurs are often dealt with issues of
quality in their produce due to which their customers are hugely affected. Small-business owners
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and entrepreneurs face shortage of funds and lack of technology implies that their produce is not
of top-notch quality which is demanded by consumers these days. Their annual turnover is low
and therefore either they procure or minimal quality goods with less or no uniqueness or
customisation (Gustomo and et.al., 2019). Due to making less investments in research and
development, small-business owners and entrepreneurs are likely to offer services or products
with less innovative ideas and therefore less customers are attracted towards their produce or
services. This issue is highly prevailing among small-business owners and entrepreneurs which
is creating obstacles in their rapid growth and implying steady progress.
Lack of skilled and trained personnel: Another major problem that small-business
owners deals with during their courses of businesses is shortage of highly skilled and trained
personnel due to which their revenues and operations get hugely influenced and affected. In
initial stages entrepreneurs are tend to perform all functions of business on their own without
less or no guidance or expertise. This leads to problem of mismanagement and due to lack of
labour their production is also minimal having less commercial value. The functions of
management are not properly done or performed in small-businesses due to which they lack in
planning, organising, directing and controlling (Álvarez Jaramillo, Zartha Sossa and Orozco
Mendoza, 2019). Moreover, due to their low magnitude of operations and less turnover, they are
not able to provide trainings to employees as training procedures are quite expensive and
involves a lot of cost and a great deal of expertise. The lack of training implies unproductive
personnel and lack of management implies high idle time of labour or employees indicating
inefficiency and chaotic situations.
Lack of monitoring performance: Small-business owners and entrepreneurs often
conduct their business operations with low monitoring as there is lack of technical assistance and
managerial skills. Due to lack of planning and less focus on strategic management, small-
business owners and entrepreneurs cannot identify major roadblocks that are restraining their
growth and high performance (Mejri, MacVaugh and Tsagdis, 2018). Lack of skilled personnel
and low expertise in financial areas makes it difficult for small-businesses to ascertain
uncertainties and determine the areas in which they are lacking. Therefore, they are not able to
devise strategies and tactics through effective controlling and monitoring performance.
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Conclusion
From the above literature review, it has been concluded that small-businesses are of great
significance in providing employment opportunities and majorly contributes in overall growth
and development of the economy. There are major challenges and issues which are affecting
growth and progress of small-business owners and entrepreneurs. Based on above literature
review, it has been observed that these small-business owners have to focus more on strategic
management which would help them in sustaining their businesses in long run. They must
acquire financial expertise and assistance so that their finances and resources can be effectively
managed. In addition to this, these businesses can enhance the scope of their funds through
raising loans in order to bring improvement in quality of production as well as for the purpose of
customisation.
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References
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Barbosa, M., Castañeda-Ayarza, J.A. and Ferreira, D.H.L., 2020. Sustainable strategic
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