ILOCOS SUR
POLYTECHNIC STATE
SantaCOLLEGE
Maria Campus
MODULE
MODULE IN
Elective 104
THE ENTREPRENEURIAL MIND
Module 3
ALBERT G. NAUNGAYAN
Assistant Professor I
Course Code: AGRO 152
Descriptive Title: CEREAL PRODUCTION
Instructor: ALBERT G. NAUNGAYAN
ILOCOS SUR
POLYTECHNIC STATE
SantaCOLLEGE
Maria Campus
MODULE
MODULE 3
THE NATURE OF SMALL BUSINESS
Business size is one factor that does not prevent one from engaging in entrepreneurship. Since
only a small number of people have capital large enough to start a large enterprise, the bigger number
of people with minimal resources are forced to operate on a small-scale basis, if they decide on
becoming entrepreneurs.
LISTS OF TOPICS TO BE INCLUDED IN THE MODULE
1. What is a Small Business
2. Types of Small Business
3. Characteristics of Small Business
4. Economic Importance of Small Business
5. Advantages and Disadvantages of Operating a Small Business
LEARNING OBJECTIVES
1. Distinguish the types and characteristics of small business.
2. Identify important role of small businesses to the economy.
3. Infer benefits afforded by small business operators.
LEARNING CONTENT
Since most new ventures will be small businesses, it is expected that majority of the efforts of
those involved in the propagation of entrepreneurship will focus on small business management. The
premise is that if small businesses are managed properly, their chances of becoming large enterprises
are increased. Since it is well-known that large enterprises bring certain benefits to the economy, small
business management is an activity worth pursuing. But if many small businesses will not develop into
large businesses, their contribution is still very significant.
What is a Small Business?
Two Approaches to Define Small Business
1. Market Share Approach- one which is independently owned and operated and which is not dominant
in its field of operation.
*independently owned- means ownership is by a private individual, a partnership, or a corporation.
*not dominant- indicates that a small business does not control a sizable share of its market.
When the total sales of a business firm is less than one percent of the total demand for its products, the
firm may be considered small business.
2. Total Assets Approach- one having total assets that fall within a certain bracket.
Example: the Magna Carta for small Enterprises (RA 6977) indicates that the firm must have total
assets valued at above Php 1.5 million to Php 15 million to be considered small business.
-The government prefers this approach because it simplifies formulation and implementation of policy.
-With the assets value bracket assigned to small business, it is inevitable that all enterprises having
total assets valued at 1.5 million pesos and below will be classified as “micro-enterprises”.
Disadvantage: asset values are affected by inflation. After so many years, inflation alters the nominal
value of business assets and what may be previously considered small business may no longer be
classified as such.
Course Code: AGRO 152
Descriptive Title: CEREAL PRODUCTION
Instructor: ALBERT G. NAUNGAYAN
ILOCOS SUR
POLYTECHNIC STATE
SantaCOLLEGE
Maria Campus
MODULE
Kinds of Business
According to Size
Public Enterprises Private Enterprises
Example: Land Bank of the Phils. Ex.: Globe Telecom
Micro Cottage Small Medium Large
Business Business Business Business Business
Kinds of Business According to Size
Types of Small Business
1. Manufacturing- type of business involved in the conversion of raw materials into products needed by
society.
Examples: bakeries, tricycle sidecar assembly shops, bagoong manufacturers, restaurants, etc.
2. Service- those that provide service in one way or another.
Classification:
a. Business Services- provide service to other business.
Examples: accounting firms, janitorial service firms, security service firms, collection agencies, etc.
b. Personal Services- provide service to the person.
Examples: tutoring services, massage parlors, voice lesson, etc.
c. Repair Services- provide repair services to owners of various machinery and appliances.
Examples: auto repair shops, watch repair shops, plumbing services, and others
d. Entertainment and Recreation- includes movie houses, resorts, billiard pool centers, etc.
e. Hotels and Motels
f. Education Services- include Montessori schools for children, high school, correspondence schools,
etc.
Course Code: AGRO 152
Descriptive Title: CEREAL PRODUCTION
Instructor: ALBERT G. NAUNGAYAN
ILOCOS SUR
POLYTECHNIC STATE
SantaCOLLEGE
Maria Campus
MODULE
3. Wholesaling- refers to the activities of persons or establishments which sell to retailers and other
merchants, and/or to industrial, institutional, and commercial users, but who do not sell in large
amounts to final consumer. A big number of these wholesale businesses are owned by small business
operators.
Examples: softdrinks wholesalers in local areas, dealers of supplies and office equipment, grains
wholesalers, etc.
4. Retailing- covers all activities involved in the sale of goods and/or services to the final consumers.
The bulk of retailing activities are performed by small businesses.
Examples: retail drugstores, fast food shops, appliance stores, etc.
5. General Construction Firms- those engaged in the construction of buildings whether for private
individuals or firms, or for the government. Many of them perform subcontracting jobs for the bigger
contractors such as installing electrical facilities and sewerage. As a whole, general construction firms
employ hundreds of thousands of people and they operate mostly in the countryside.
Characteristics of Small Business
1. Independent management- the owner is also the manager.
2. Small capital requirement- small business requires only small capital and this can be supplied by a
single or a few individuals.
3. Mostly local operation- small business usually operates in a certain locality although there are cases
when the market is not confined to a local area.
Economic Importance of Small Business
1. Providers of economic opportunities to entrepreneurs- people who do not feel comfortable as
employees have the option of engaging in small business operation.
2. Providers of products and services to consumers- the production of many products and services is
oftentimes not feasible with big and medium business operation. These limited opportunities are
naturally fitted for small businesses.
3. Suppliers of products and services to other businesses- some businesses require raw materials,
semi-finished parts, finished components, or even labor, which they cannot economically produce. The
small businesses perform this task for them.
4. Distributors of products and services of other businesses- some manufacturers do not have the
ability to distribute their products and services. Many small businesses assume this role for them.
5. Supporters of government- small businesses support the government with the taxes they pay, as well
as performing other functions.
6. Providers of employment- a large proportion of the labor force are employed by small businesses.
Advantages of Operating a Small Businesses
The following are various options of an individual to improve his economic lot:
1. Be an employee.
2. Be a professional.
3. Be a small business operator.
Importance of Small Business to the Economy
1. Provider of economic opportunities for entrepreneurs.
2. Provider of products and services to consumers.
3. Provider of funds to the government in the form of taxes.
Course Code: AGRO 152
Descriptive Title: CEREAL PRODUCTION
Instructor: ALBERT G. NAUNGAYAN
ILOCOS SUR
POLYTECHNIC STATE
SantaCOLLEGE
Maria Campus
MODULE
4. Provider of employment to the labor force.
5. Supplier of products and services to other businesses.
6. Distributor of products and services produced by large firms.
Benefits of a Small Business Operators for whatever damages happen as a result of faulty decision-
making:
1. Opportunity to gain control over his own destiny- the prospective small business owner can choose
from several business opportunities that he would like to tale advantage of. If after a few years, he
thinks that the business is not worth operating anymore, then he can dissolve it and open a new one.
This option is not made available to plain employees and professionals.
2. Opportunity to reach full potential- the employee will do his work based on prescribed targets which
may only require less than his full potential. This is not so with the small business operator. His freedom
to act is limited only by his potential and he can revise or amend his targets within short notice.
3. Opportunity to reap unlimited profits- if the small business , all profits, big or small, accrue to the
owner. If he is not satisfied, he may exert more efforts to increase his profits. This opportunity is not
afforded to a plain employee.
4. Opportunity to make a contribution to society and receive recognition for his efforts- entrepreneurs
who make innovative products available to the public are recognized properly by society.
Disadvantages of Operating a Small Business
1. Uncertainty of income
2. Risk of losing your entire capital investment
3. Lower quality of life until the business gets established
4. Complete responsibility
5. Having to serve undesirable customers
6. Paperwork and other chores
7. Long hours and demanding work condition
Comparison of Employment and Small Business Operation
Factor Small business Operation Employment
1. Income Uncertain Certain
2. Capital investment Risk of losing None required
3. Quality of life Lower until business gets Consistent at a certain level
established
Responsibility Complete/all encompassing Restricted to one’s job
a. Gain control over his own Present Present
destiny
b. Reach his full potential Present Present
c. Reap unlimited profits Present Present
d. Make a contribution to society Present Present
and receive a recognition for his
efforts
Course Code: AGRO 152
Descriptive Title: CEREAL PRODUCTION
Instructor: ALBERT G. NAUNGAYAN
ILOCOS SUR
POLYTECHNIC STATE
SantaCOLLEGE
Maria Campus
MODULE
ASSESSMENT
Answer the following questions. Answers should be handwritten and to be submitted to the Google
Classroom.
1. How important are small businesses to our economy?
2. What benefits are afforded by the entrepreneurship to the small business operator?
Note: Quiz will be administered using the Testmoz Application.
Course Code: AGRO 152
Descriptive Title: CEREAL PRODUCTION
Instructor: ALBERT G. NAUNGAYAN