| Though small businesses are privately owned, | | | | customers are their bosses. |
| operated with a small number of employees and | | | | Running a small business also comes with a variety of |
| relatively low volumes of sales they still play a major | | | | problems which are related to their size. One of |
| role in the development of the world's economy. A | | | | these major challenges is under-capitalization mostly |
| small business is defined by the number of | | | | brought about by poor planning. It is common |
| employees, annual sales (turnover), value of assets | | | | knowledge that an entrepreneur should have access |
| and net profit. Small businesses are also not dominant | | | | to money at least equal to the projected revenue |
| in their field of operation. | | | | for the first one year of business in addition to the |
| The advantage of running a small business is that it | | | | anticipated expenses but usually this is not the case. |
| can be run at a low cost and on a part-time basis. | | | | Small Businesses need to be mindful of contribution |
| Sole proprietors tend to be intimate with their | | | | margin (sales minus variable costs). This means that a |
| customers and clients which usually results in greater | | | | small business must be able to reach a level of sales |
| accountability and responsiveness. A small | | | | where the contribution margin equals fixed cost. |
| entrepreneur has independence; he can make his | | | | Small business owners under price their products to a |
| own decisions, risks and reap the rewards of his own | | | | point where even at their maximum capacity it would |
| efforts alone However, entrepreneurs have to work | | | | be impossible to break even. But cost control or price |
| long hours and understand that ultimately their | | | | increase often resolves this problem. |