Importance of Small Businesses and Start-ups in the Social Economy
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This article discusses the importance of small businesses and start-ups in the social economy. It explores their contribution to infrastructure improvement and employment generation. It also highlights the role of social economy organizations such as mutuals, foundations, charities, and associations.
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Entrepreneurship and Small Business Management 1
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Table of Contents INTRODUCTION...........................................................................................................................3 MAIN BODY...................................................................................................................................3 P1 Different types of entrepreneurial ventures and their relation with typologies......................3 P2 Similarities and differences between entrepreneurial ventures..............................................4 P3 Relevant data and statistics which shows how small and micro businesses impact on the economy.......................................................................................................................................6 P4 Importance of small businesses and start-ups to the growth of the social economy..............8 P5 Skills of a successful entrepreneur which differentiate them from business manager...........9 CONCLUSION..............................................................................................................................12 REFERENCES..............................................................................................................................13 2
INTRODUCTION Entrepreneurship termed out as process that aids to create new enterprise. They also has capacity and willingness to develop, organise and manage risk to business venture to make profit. Therefore, an individual who undertakes the risk to start up business venture is called out as entrepreneur. The present report will be based on topic of Entrepreneurship and small business management.Furthermore,studywillcovertheactivitiesastocoverdifferkindof entrepreneurial venture and typologies. Thus, Relevant data and statistics has been used to reflect on small and micro businesses impact on the economy. Lastly, background and experience will be defined that hinders or foster entrepreneurship. MAIN BODY P1 Different types of entrepreneurial ventures and their relation with typologies Entrepreneurship is the process of developing a new business. There are various kinds of ventures that can be developed by entrepreneur. These are described as below: ď‚·Small business: These are such business venture that covers large market share. These firms are generating limited profit and get funds from family or friends. The objective of these small ventures are to generate certain amount of profit that may help in recovering the operational cost so that firm can sustain in market for longer duration. In addition, it can be said that it may be sole traders, partnership and corporation, privately owned whose main aim is to make profit and take competitive advantages.For example: plumbers, electricians, grocery stores are the great example of small ventures(The Four Types of Entrepreneurship, 2020). These firms can get micro loan facilities from private financial institutes. Owner has to pay tax as personal tax because there is no need to pay company tax in such small business ventures. Legal structure of these firms are very simple as owner takes all decisions by own. ď‚·Large venture: These are the big firms that have huge capital and have capability to bear huge risk. These firms always implement innovative ideas so that it can gain attention of large audience and can sustain in the competitive market for longer duration. These large organization offers wide range of products and services and charge accordingly. These firms ensure to fulfil needs of consumers so that they can make consumers loyal towards the brand.In addition, it can be said that all those companies whose main aim is to make 3
profit and grow their business and also reach global customers are known as large organization. They invest highly in order to run business at a large scale.For example: Google is the great example of large ventures. ď‚·Social enterprise:These are the kinds of ventures that focuses on creating such kinds of products that may help in meeting needs of society members and resolving their problems. Their main agenda is to improve wealth of consumers by serving them best. For example:Safepoint trust, Red cross are working as social ventures those which are continuously working to improve wellbeing of people. ď‚·Scalable venture: This is the kind of venture which have faith on the aspect that new vision can change entire world. Venture capitalist invest funds in these kinds of startups and company hires talented employees those who can help in meeting that vision greatly. Facebook, Instagram are the example of scalable ventures. These scalable firms have ability to raise profit and generate more employment. So, it can be said that those businesses who mainly focus on business to business activities are known as scalable. They act for growing larger. Amazon is the great example of scalable firm that is having capability to provide job opportunities to many people and generate more revenues. Typologies Life style typology is implemented by small ventures that works to generate reasonable amount of profit. Founder of business show their skills to set up business successfully. Gazelles are another kind of typology which is implemented by large organization. These are such kinds of firm that works to generate huge profit and have capability to dominate the market by becoming market leader. Goal of such kinds of typology is to expand business and make the firm successful in such competitive market (The Four Types of Entrepreneurship, 2020). Companies that are generating revenue between 2-10 million can implement Gzaelles typologies. Hence large organization adopt this typology and raise 20% revenue every year. These high growth firms can gain opportunities in market. P2 Similarities and differences between entrepreneurial ventures There are some similarities as well as differences between entrepreneurial ventures which are discussed below. 4
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Similarities between entrepreneurial ventures SimilaritiesSocialScalableLarge RiskThemainaimofsocial businesses is to serve people butstillstaffinthistype havetofaceseveral problems. Different types and size ofscalablebusinesses requireddifferent investment amount. But risk present in all types. It may be huge and small as well. Large entrepreneurial ventureshavehuge risk because it invest huge amount so, loss, changesin regulations are some kindofrisks. Financial,technical etc. InnovationSocialentrepreneurial ventureswanttoimprove living standard of people so, they bring some innovative ideas.It can also be said that by bringing innovation they support other organizations aswellasprovide employmentopportunities to the great extent. Formakinggrowthas like large, scalable also bringcreativityand innovation in the market. By making products and services innovative, they canbeinginthe competition and can take advantagesofother opportunities. One of the main key ofthesuccessof large organizations is theirabilityof creativityand innovation. SustainabilityAim of this company may differ than others but one of the main aim for which they work is sustainability. Sustainabilityand makingbusinessesable to run for the long run is one of the main aims of scalablebusinesses becausetheyperform activitiestogrowtheir businesses. Large businesses run theirbusinessesat largescale so, itis important for them to maketheirbusiness sustainable.Forthis purpose they perform allactivitiesinthis manner. So, it can be 5
saidthat sustainabilityisone of the common aim. Differences between entrepreneurial ventures Similar ities SocialScalableLarge SizeIn the context of size off social businessesorentrepreneurial ventures, it can be said that they canbeinspecificcommunity where living standard of people is not good and company wants to improve them.It can also be located and expanded in council inLondon.Itvariesandby expanding its size, they want to help all those people are needy and requires help. Sizeofthistypeof organizations depend upon the nature of business. It may be cafe, hair salon and otherswhoseaimdiffer andsizealsodiffer. Different size of businesses requiredifferentlimitof investment. Theseentrepreneurial ventures can be in all over the UK because it invests amount in large amountandrun business at large scale. Number of employ ees In the context of social, there is nospecificrequirementof number of employeesas itall dependuponthesizeofthe company. Numberofemployeesin scalableventuresdepend uponthesizeofthe company. Inlarge entrepreneurial ventures,numberof employeescanbe more than 1000. Structur e Inthistypeofentrepreneurial venture, almost all businesses are trustee based organization. Scalablebusinessesmay have corporate type or may havepartnershiptypeof structure. Largeentrepreneurial ventureshavea complex structure. 6
P3 Relevant data and statistics which shows how small and micro businesses impact on the economy Micro business:Micro businesses refers those businesses who run at small scale or it can be said that those businesses who operate with fewer than 10 people and also require small amount of capital (Macasaet and et.al., 2019). Small business:Small businesses are those who has turnover of up to the approximate ÂŁ6.5 Million and does not have more than 50 employees. It can be said that they are limited in the size as well as revenue (Burns and Dewhurst, 2016). Contribution of small businesses in UK economy As per the data, it is analysed that approximate 99% of private businesses of UK among 5.9 million were small and medium size in the year of 2019. Small businesses are known as important businesses or crucial to the UK's economy. Their contribution in improving economy is not stable as it is increasing. 7
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Employment increment:From the above data, it can be said that small businesses of the UK areproviding employment opportunities to the people of the UK to the great extent. They have provided employment to approximate 4,117 people.So, from the data, it can be said that small businesses of UK are playing an effective role in increasing employment. By providing employment opportunities to people it is directly improving economy of the country, Tax contribution:On the basis of above data, it can clearly seen and said that small businesses such as bakery shops, coffee shops and others are approximate 211,295. It is all are making growth which means they are making profit. When an organization makes profit than it is clearly said that they pay tax which directly improve economy of the country.It also helps 8 Illustration1: Private sector businesses in the UK by size Sources:(SME Data of UK. 2020)
vulnerable people directly because this tax is being used for emergency uses and other main important function which help all people of the country. Contribution of micro businesses in UK economy Innovation:In the context of micro businesses it can be said that they are mainly known for their contribution in improving UK economy. In addition, it is stated that micro businesses of the UK provide the economy with a healthy supply of new skills, creativity and ideas as well as make marketplace dynamic.It is one of the main roles of micro businesses for which they are known. By bringing innovation in the market they are not only improving their productivity but also helping other companies in solving problems and making their product innovative. Revenue Generation:From the above data, it can be said that in the UK total micro businesses are 5,613 which are providing employment to approximate 9,041 people. Al these micro businesses of the UK are generating approximate ÂŁ900 Billion turnover. It can be said that it is generating total 22% revenue. From this data it can clearly be said that this increasing number of micro businesses are having great positive impact on the UK economy. P4 Importance of small businesses and start-ups to the growth of the social economy Social economy: Social economy is a branch of economy whose focus and responsibility is to improve relationship between economy and social behaviour. It shares common values as likedemocraticgovernance(Waters-LynchandPotts,2017).Thistypeofeconomy organizations are being divided into several parts as per their size. 9 Illustration2: Contribution of Micro businesses Sources: (Businesses of the UK Statistics. 2019)
Four pillars Mutual:Mutuals are those kinds of companies who not only provides life but also provide non-life services as well as social security types of schemes to people. The main aim of mutuals is to satisfy basic needs like food, shelter and others of people. Some friendly societies of the UK are examples of Mutuals. Foundations:It is also as like mutuals whose main aim is to work for societies and improving their living standard. They mainly focus on protecting human rights and known a foundation. European foundation centre is the best example. Charities:It is also an organization who mainly set up and run business for raising money for those who are not able to earn and are vulnerable (Hyndman and McConville, 2018). Marie Curies is the best example which is a charity of the UK. Associations:It is a group of people which may be large and small. Members in an association have a common goal of working for societies and people who need their help. People involve in association voluntarily. Faculty of advocates in the UK is an example. Importance of Start-ups in social economy Improving infrastructure:Start-ups of the UK are mainly known for their contribution in a social economy. It is stated that social economy is mainly contributing in improving infrastructure by using their creativity and other skills and having the main aim of improving living standards of people. Start-ups businesses have innovation and creativity skills and they bring this innovation in social economy which allows people to think out of their box. These skills and abilities of start-ups businesses make them as well as others able to perform activities in less cost, labour and time. It directly affects their living standards as well as cost. They also make people aware about the governments initiatives. It is also stated that start-ups businesses have full support of the government in funding which motivates them to think for societies and improving social economy.Some other start-ups like Uber, AirBnB are having a rapid growth. It can be said that with the help of all start-ups companies and examples that tey are helping people to the great extent by providing their services and providing employment opportunities as well. Employment:Start-ups have innovation skills and with the help of this skill they try to grow and expand their business. When they think about expanding then they give employment opportunities to others at enough pay (Orlova and et.al., 2018). It does not only help them in 10
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growing and developingtheir businesses but also help in improving social economyby increasing income of people. There are some examples of companies who are runnig their businesses at large scale, but they have started their business at small level initially as a start-ups such as Microsoft, Apple. So, it can be said that start-ups are mainly known for its contribution and providing employment opportunities. Importance of Small business in social economy As like start-ups, small companies are also playing a big role in improving social economy such as: Improving lifestyles:One of the main aim of social businesses of the UK is to satisfy needs of people and improving their living standards. Small businesses are famous and are increasing because it brings new ideas in the market which allows people to improve their living standards by using unique ways of performing activities. For example: There are some data which shows that small businesses have contributed in improving living standards of farmers by bringing out new ideas and innovation. It is also stated that pesticides, irrigation facilities and other ways by which farmers can improve their ways of performance are contributions of small businesses(Role of Small Businesses In the Agricultural Sector,2014.)Improved life style of people increase their confidence and motivate them to work something unique than others and it brings innovation in the market. Protection of environment:It is stated that small businesses are protecting environment to the great extent. As with the help of their creativity and innovative skills they started to use paper shipping bags instead of using plastic bags. Plastic bags can harm to the environment to the great extent and this initiative has made several changes (Ribeiro-Soriano, 2017). P5 Skills of a successful entrepreneur which differentiate them from business manager Entrepreneur is an individual who sets up and run a business as like other business manager, but they have some skills and characteristic traits which makes them differ than business manager. Some skills which a successful entrepreneur have and which differ them from other business manager include: Willingness to learn::Willingness to learn all the time whenever they need it is one of the main skill of a successful entrepreneur. A successful entrepreneur and an individual who has willingness to learn not only from their seniors but also from their employees and juniors if 11
required, makes them able to perform activities in a better way and it also increases their knowledge (Odewale and et.al., 2019). Leadership:Leadership refers an ability and skill to work with employees and others by guiding them in an efficient manner. A successful entrepreneur is not one who always focus on developing their skills but it is one who think about others with whom they work. So, an ability to guide others and willingness to develop others differ a successful entrepreneur than a business manager. Motivation:Motivation means an ability which elicit a desired behaviour. Motivation is an important factor which pushes people to do something. A successful entrepreneur have motivation skills which not only pushed him but also they try to push all members with whom they work in order to accomplish goals. Self motivation makes an individual able to perform any kind of work in a very effective manner. Independence: Independence or having an ability to work and perform activities at their own or by taking help of anyone. A successful entrepreneur is one who has skill and ability to solve any type of problem and ways to perform activities without making themselves dependent on others. Communication:An effective communication skill is not limited to interact with others but it also includes an active listening and having skills of influencing others by using such kind of effective words in communication. An effective communication and the way of talking makes an entrepreneur successful as well as differ than other business manager (Liang, 2019). Creativity:Creativity is also considered one of the main skill and ability of doing something new and different from others. An individual who has a creative mind and skills of making something unique whether they are products and services and way of performing activities. This is the main skill which makes an entrepreneur success as they have ability to perform activities in a different and unique ways which can save their time, cost as well as labour. In less time, cost and labour they can perform activities more effectively. So, from the above discussed skills, it can be said that why a successful entrepreneur is differed than other business manager. For more understanding this, it can be understood with some differences such as: SkillsEntrepreneurBusiness manager 12
Willingness to learnA successful entrepreneur always try to learn something new whenever they feel requirement. A business manager thinks that they have enough knowledge anddonotrequirelearning more. LeadershipA successful entrepreneur guide others and focus on both himself and others. Abusinessmanageronly overseesperformanceof employeesratherguiding them. MotivationAsuccessfulentrepreneurhas motivationskillswhichkeepsthem motivated to work even more harder. There is a lack of motivation in a business manager. IndependenceEntrepreneur has ability to think out of the box which allows them to work independently. Abusinessmanageris somehowdependentof employeesandleadersfor managing business activities. CommunicationA successful entrepreneur has all types of communication skills. Thereisalackofactive listeningskills(Balachandra, 2019). Treatmentto employees An entrepreneur is a friend and have ability to treat employees in different manneraccordingtothesituation. They treat with employees as like a friend and leader depends upon the situations. A business owner treat their employees as like an asset of anorganization,Theyhire employeesonlybecauseof helping their business to grow. Perspectivetowards competition It canbe said thatan entrepreneur often tries to improve themselves and beat his worst competitor which he considers himself. A businessman tries to beat his competitorswhoeverpresent in the market rather improving himself. CreativityCreativity is the skill which makes anAbusinessmanagerkeeps 13
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individual a successful entrepreneur.repeatingthesamewayof working performance as they do not think out of their box. P6 Define how aspects entrepreneurial personality reflect entrepreneur motivation and mind set. Entrepreneur personalities defined as trait that inclusive of human characteristic, abilities, motives and values that shapes the individuals person experience and actions (Yunus, 2017). These all are termed out as the personalities traits that cause mental and behavioural processes of individuals. Motivation aids to individual to put their efforts continue to accomplish future outcomes. Entrepreneur are blessed with some of positive traits that cannot be easy to acquired by everyone's. Thus, the model can be used to know the mindset of the two prominent entrepreneur within UK such as Richard Branson and Jean Paul Getty. Therefore, the model outlined as-: Openness-: This is trait that is comprised of imagination, foresight and insight ability of an individual. If an entrepreneur have the high openness trait that means he has wider range of interest (Zahra and Wright, 2016). They are the individuals who are eager to know the new things and innovative approaches. In this, Richard is one of best example of open personality trait. Therefore, his open mind assist in creativity. Branson known for adventurers marketing method and efforts that results of his perception. Conscientiousness-If an individual have high level of conscientiousness that means these re equipped with objective oriented behaviour. They are individuals assert all required action on time and this is crucial to accomplish goal. Thus, Jean Paul Getty is organised individual and also have effective time management skills. After becoming the successful leader, the all minute change in petroleum industry observed by him. Extraversion-This aids to reflect the emotional expressiveness within an individual. An individual who is talkative an gives promptly reaction are able to tackle the social situation successfully (Richter and et.al., 2016). Thus, it has been found out that Richard has high extraversion, active and vibrant that makes him extrovert. On the other hand, Jean Paul is introvert type of personality. Agreeableness- It is inclusive of all social ethical behaver life affection, respect, trust and kindness. An individual who have high agreeableness have car for belongings treat each other 14
with empathy and ready to assist others. In addition to this, Richard and Jean Paul Getty both can be defined as same at this point as they both tackle people effectively. Neuroticism-This is deals with the psychological behaviour of an individual. In which individual have frequent mood changes, worries and stress (Storey, 2016). It is not good for individuals who needs to undertakes some work that is risky and to those people who easily get demotivated. Determination- An individual who are more determined to objectives has idea that how to cross the bridge with broken leg. These individual has idea that how to tackle adverse situation. P7 Define how background and experience hinder or foster entrepreneurship. Background and experienceis a clear factor that accumulate that life experience has a greater role to play in the formation of the entrepreneurship.There are number of components thatcontributesinconstitutionof leader.For example-ifanindividualbelongstofree environment and creative surrounding that has prominent feature of leader in which child who bought up has prominent characteristic of leader (Pittz and Hertz, 2018). On the other hand, where the child is bought up with high restriction has less creativity. However, freedom and creativity are of no use if an individual do not have enough financial resource.Richard Branson himself clarifies that risk taking ability is mainly an acquired skill, in which he has already dealt with the same situation before in his business experience Richard is an individual who knows how to identify and grab the opportunity this skill he has developed in his childhood when his mother left him. He also has learnt to receive direction from other before undertaking anything. Thus, he put his lesson in the business too. Therefore, marketing team always ask for needs before develop anything for them. Good experience aids to an individual to take risky decision. Thus, bad experience results into resistance to change. Jean Paul Getty has faced some situation that led him to decide to build empire in most capital intensive industry that is petroleum industry. Therefore, he managed all adverse condition due to determined will power. In the entrepreneur formation process, nature of family member, economic status cannot be ignored. Richard had faced huge failure in business of virgin cola and virgin car. This disappoints works as basis of his milestone accomplishment in virgin Atlantic. Henceforth, this 15
can be stated that Richard Branson was not having favourable background element. Thus, he still manages to expand his knowledge in many of the fields of which he does not have knowledge. CONCLUSION From the above study, it has been summarized that entrepreneurship termed out as process that defined as process to undertake design, launch and run a new business. Therefore, entrepreneurship termed out as crucial driver to economical growth and innovation. The present report covered things on topic as Entrepreneurship and small business management. Furthermore, report has covered the activities of differ kind of entrepreneurial venture and typologies. Thus, Relevant data and statistics has been used to reflect on small and micro businesses impact on the economy. Lastly, background and experience has been defined that hinders or foster entrepreneurship. 16
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Pittz and Hertz, 2018Richter and et.al., 2016. Storey, 2016 Yunus, 2017Zahra and Wright, 2016. 18