Jill Mitchell

WHO AM I?

Jill Mitchell BSc(Hons) Chemical Engineering MBA Currently studying for a PhD in Entrepreneurship at Pretoria

University Chartered (Professional) Engineer

www.jillmitchell.net

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Assessment Weighting Due Date

Assignment 1 15%

Assignment 2 15%

Test One 15%

Test Two 15%

ICE 6 Tasks

Examination 40%

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Definition of a Small Business

“A separate and distinct business entity, including co-operative

enterprises and non-government organisations, managed by

one owner or more, including its branches and subsidiaries, if

any, is predominantly carried on in any sector or sub-sector of

the economy mentioned in column 1 of the Schedule and which

can be classified as a micro-, a very small, a small or a medium

enterprise by satisfying the criteria in columns 3,4 and 5 of the

Schedule opposite the smallest relevant size or class as

mentioned in column 2 of the Schedule”

Qualitative Criteria

Relate to ownership structure

Be a separate and distinct business entity

Cannot be part of a group of companies

If it does have subsidiaries and branches, they must be included when measuring size

Should be managed by its owners

It can be a natural person, sole proprietorship, partnership, or a legal person such as a close corporation or company

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Quantitative Criteria

Classifies into micro, very small, small and medium, using the following criteria for different sectors in economy

Total full-time paid employees

Total annual turnover; and

Total gross asset value (excluding fixed property)

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Advisory Board to replace NSBC

Public Finance Management Act 1999 applies to Agency

Schedle revised (definition) to reflect current rand value

“other non-financial services” deleted in order to give more focus

Added: “expand, co-ordinate and monitor the provision of training, advice and counselling to small business

Added: “to facilitate and co-ordinate research relating to support programmes by the agency

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Act 26 of 2003 : GG No 25763, 26 Nov. 2003)

SMALL BUSINESS – A small business is one that is independently owned, managed and controlled; is not dominant in its field of operation; and employs fewer than 50 people; with a turnover not exceeding R5million per year.

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Spaza shops Vendors Franchises Brokerages Cleaning Services Underwriting Agents Photography business

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Sector or sub-sectors in accordance with the standard industrial classification

Size or class

Total full-time equivalent of paid employees

Total annual turnover

Total gross asset value (fixed property excl)

Less than Less than Less than

Agriculture Medium

Small

Very small

Micro

100

50

10

5

R 4.00m

R 2.00m

R 0.40m

R 0.15m

R 4.00m

R 2.00m

R 0.40m

R 0.10m

Mining & quarrying Medium

Small

Very small

Micro

200

50

20

5

R30.00m

R7.50m

R3.00m

R0.15m

R18.00m

R4.50m

R1.80m

R0.10m

Manufacturing Medium

Small

Very small

Micro

200

50

20

5

R40.00m

R10.00m

R 4.00m

R 0.15m

R15.00m

R 3.75m

R 1.50m

R 0.10m

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Sector or sub-sectors in accordance with the standard industrial classification

Size or class

Total full-time equivalent of paid employees

Total annual turnover

Total gross asset value (fixed property excl)

Less than Less than Less than

Electricity, gas & water Medium

Small

Very small

Micro

200

50

20

5

R40.00m

R10.00m

R 4.00m

R 0.15m

R15.00m

R 3.75m

R 1.50m

R 0.10m

Construction Medium

Small

Very small

Micro

200

50

20

5

R20.00m

R 5.00m

R 2.00m

R 0.15m

R 4.00m

R 1.00m

R 0.40m

R 0.10m

Retail and motor trade and repair services

Medium

Small

Very small

Micro

100

50

10

5

R30.00m

R15.00m

R 3.00m

R 0.15m

R 5.00m

R 2.50m

R 0.50m

R 0.10m

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Sector or sub-sectors in accordance with the standard industrial classification

Size or class

Total full-time equivalent of paid employees

Total annual turnover

Total gross asset value (fixed property excl)

Less than Less than Less than

Wholesale trade, commercial agents & allied services

Medium

Small

Very small

Micro

100

50

10

5

R50.00m

R25.00m

R 5.00m

R 0.15m

R 8.00m

R 4.00m

R 0.50m

R 0.10m

Catering, accommodation & other trade Medium

Small

Very small

Micro

100

50

10

5

R10.00m

R 5.00m

R 1.00m

R 0.15m

R 2.00m

R 1.00m

R 0.20m

R 0.10m

Transport, storage & communications Medium

Small

Very small

Micro

100

50

10

5

R20.00m

R10.00m

R 2.00m

R 0.15m

R 5.00m

R 2.50m

R 0.50m

R 0.10m

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Sector or sub-sectors in accordance with the standard industrial classification

Size or class

Total full-time equivalent of paid employees

Total annual turnover

Total gross asset value (fixed property excl)

Less than Less than Less than

Finance & business services Medium

Small

Very small

Micro

100

50

10

5

R20.00m

R10.00m

R 2.00m

R 0.15m

R 4.00m

R 2.00m

R 0.40m

R 0.10m

Community, social & personal services Medium

Small

Very small

Micro

100

50

10

5

R10.00m

R 5.00m

R 1.00m

R 0.15m

R 5.00m

R 2.50m

R 0.50m

R 0.10m13

Country No. of Employees

Annual Turnover

Other

Australia Less than 20 employees

None but $ limits for taxes & financial reporting

UK Less than 50 employees

Less than £5.6 million

Canada Less than 50 employees

France Less than 50 employees

Less than Є10 million

USA 500 Manufacturing 100 wholesale trade

$ 6million retail & service$ 0,75 for agriculture

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To strengthen the existing base of small

enterprises by ensuring they can

compete in the marketplace and that

they are not prejudiced because of their

size , relative to large firms.

(Lundström & Stevenson, 2001:37)

Measures to stimulate entrepreneurship Aimed at pre-start, the start-up and post start-up phases Designed and delivered to address areas of motivation,

opportunity and skills Primary objective of encouraging more people to consider

entrepreneurship as an option To encourage and develop entrepreneurial and growth

ventures

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Not all small businesses are entrepreneurial Example: lifestyle firm, elderly couple purchase a coffee

shop Entrepreneurs usually aim for high potential return

ventures Three factors distinguish entrepreneurial ventures:- Innovation Growth potential Broad vision

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Read text p 17 manual

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  SMALL BUSINESS ENTREPRENEURIAL VENTURE

Preferred funding source Owners own capital investment Other people’s capital investments

When the business is in trouble Cut costs Sell more

What’s more important Sales Marketing

Personal control preference Retain autonomy Involve other key personnel

Focus Efficiency Efffectiveness

Meta-strategy Imitation Novelty

External control preference Control business Control market

Grow When necessary When possible

Human resources Personalise Professionalise

What limits growth Fear of loss of control Market response

Delegation orientation Delegation is difficult Delegation is essential

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Feature Small business policy Entrepreneurship policy

Objective Protection against big business Motivate more new entrepreneurs

Target Existing firms, Business(entities) Nascent entrepreneurs / new business starters Individuals (people), growth orientation

Targeting “Pick winners” (i.e., growth sectors, firms)

General population/subsets (i.e., women, youth)

Client group Easy to identify “existing” Difficult to identify “nascent”

Levers Direct financial incentives (tax-credits, loans, guarantees)

Non-financial, business support (networks, education, counseling)

Focus Favourable business environment (i.e., tax regime, reduce red-tape)

Entrepreneurial culture/climate (i.e., promote entrepreneurship)

Delivery system Well-established Lots of new players (need orientation)

Approach Generally passive Pro-active outreach

Results orientation More immediate (Results in less than 4 yrs)

More long-term (Results can take longer)

Consultation SME associations Forums do not generally exist

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Favourable business climate e.g., tax regime, competitive environment, savings, flexible labour market, competitive banking system, low inflation, low interest rates, etc.Make it easier to go through the steps Reduce entry/exit barriers. Improve access to advice, information, networks mentoring, incubators. Provide access to micro-loans and seed capital

Make it easier to gain know-how Put entrepreneurship education in schools. Tailor entrepreneurship training programs. Support student venture programs. Establish peer learning

Increase awareness and legitimacy of entrepreneurship Provide information about its role in society. Profile role-models. Promote entrepreneurial role as feasible option

Make it easier to survive and grow Improve access to resources – financing, networks, expertise. Improve access to markets, employees, technology. Reduce regulatory and labour market obstaclesMake it easier to gain management know-how Access to counselling, technical assistance, management skills, peer networks, “best-practice” management tools, performance benchmarks

Influence “will to grow” motivation Promote new business possibilities. Promote growth possibilities. Promote role-models

Opportunity

Skills

Motivation

For start-up Create entrepreneurial climate For growth

General population “A want-to-be” Nascent Start-Up Survival Growth

tn t T-42 months

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Economic growth occursIncomes increaseLiving standards improveInvestment opportunities arise

Entrepreneurial orientation

Culture Role models Education Work experience Personal orientation

Supportive Environment

Infrastructure Finance Laws TrainingDevelopment services

Co-operative Environment

Institutions which are actively involved and assist with new

firms

Entry of entrepreneurs

Acquired abilities Inherent abilities

Products / Services

Results of entrepreneurship

+Tax base is enlarged by a greater number of new firmsTechnological development occursJob opportunities arise

Management made up of 4 basic functions:- Planning Organising Leading (activating) Controlling

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Six additional management functions can be added to form the management process:-

Decision making Communicating Motivating Co-ordinating Delegating Discipline

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Small Enterprise Development Agency

Never under estimate the challenges of running a small business: - “ it requires you to be disciplined, organised and well informed……to learn as much and as quickly as you can – and then practice the craft of managing yourself and others”

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As a minimum small business owners require expertise in marketing and management if they are going to be successful

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Creativity and innovation (experimentation

Autonomy (independence)

Risk taking

Pro-activeness (taking initiative, Pursuing

opportunities)

Competitive aggressiveness (achievement oriented)

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Contributes to individuals entrepreneurial

orientation

Research required on youth

entrepreneurship vs work experience

before start-up

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Exposure to entrepreneurial activities increases propensity towards entrepreneurship

Entrepreneurial “heroes” e.g. Rupert, mapanya

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Entrepreneurship can be developed through education

High-potential (ICT, gazelles) entrepreneurs = positive linkage

Van Vuuren & Nieman

E/P = M (E/S X M/S)

Model for curricula development

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Culture= norms, beliefs, symbols, attitudes, behaviour, and artefacts that members of society use to cope with their world and one another= Transmitted from one generation to another

Hofstede’s cultural dimensions Power distance index Individualism Masculinity Uncertainty avoidance index Long-term orientation

Hofstede’s research help us to be more effective when interacting with people

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Africa nations have strong cultural environments that

differ significantly from other nations particularly Western

industialised countries

Cultural attributes (as identified by Hofstede and

Kanungo) and their influence on African entrepreneurship

needs to be tested empirically

Therefore different interventions need to be developed

for different cultural groups

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Kanungo (1994) based on Hofstede’s work (1980)

found developing countries;

High power distance

High uncertainty avoidance

Low individualism

Low masculinity

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Family, schools & work organisations believe in hierarchy

of authority

Authority and control based on age and kinship

Denies people opportunity to participate in decision

making and self-confidence

Rural areas these values still very intact

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Shun away from uncertain situations or an inherent

unwillingness to take risks

Career aspirations toward self-employment very low

Fear of failure

In SS Africa failure seen as symbol of weakness and

dereliction of duty

Limits initiative and creativity 35

Greater predisposition towards family or group interests than

individual interests

Collectivism and ubuntu

Extended family

Collective interests does not promote spirit of independence

and self reliance

Diminishes capacity for individuals to make meaningful savings

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Equals a low drive for achievement

Low predisposition towards success (McClelland)

Do not derive personal satisfaction from accomplishing a

task

Result = heavily dependent on government to provide for

their needs

High nAch = stimulates growth and prosperity

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Strategy skills Planning skills Marketing skills Financial skills Project management skills Human relation skills

See table page 22 in manual38

Planning Knowledge of competitors and a market

orientation Client orientation High quality work Financial insight and management Specific knowledge and skills relevant to the

business context Making use of experts

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Government should help to create a supportive environment Legislation Policies

Environment should create a climate favourable to the entry of entrepreneurs Financing by ordinary financial institutions such as banks Venture capital access Training and development programmes should encourage

entrepreneurship (job providers vs. job seekers) Infrastructural development prerequisite for any economic

activity at an advanced level Deregulation i.r.o. of economic activities as well as legal

regulations 40

Roads

Water supply

Sewerage

Power supply

Telecommunications network

Industrial zones and clusters

Facilitates the production of goods and services

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The basic physical and organisational structure needed for the operation of a society

Deregulation = creates opportunities Over regulation = restricts free trade

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Important resource Access important

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Training Advice Counseling Mentoring Networking Finance Incubators Clusters

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There must also be other institutions that actively

promote entrepreneurship

Tertiary institutions i.r.o. education and research

Institutions giving business support, finance and / or

training

Involvement through SMME development units

NGO’s and CBO’s

International aid agencies

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N. AchN. IndependenceRisk takingRole model performanceWork experienceExpected unemploymentOpportunity perception

Entrepreneurial education: reflective modes (lectures)

Entrepreneurial education: active modes (Business plan, case studies, field work)

Entrepreneurial programmes: (overcoming resource constraints)

Industry support (partners)

Entrepreneurial Intention

Individual factors

Source: Walter, C. et al IECER 2009 Conference

Exists almost everywhere in South Africa 8 factors that lead to higher business formation in a given

geographical area:- Population growth Unemployment Wealth Workforce qualifications Business size Housing Local government Government policy

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Finding and retaining qualified workers Legislation and regulation Economic uncertainty Keeping up with technology Access to capital Lack of time to plan Lack of knowledge Working hours

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Revision questions page 27/28 of manual

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