Definition and Importance of Small Scale Businesses

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Definition and Importance of Small Scale Businesses

In this post, you are going to ;learn about the definition and importance of small scale businesses. The creating and building of Small businesses should be of important interest to us.

Definition of a Small Scale Business

Small and medium enterprise, sometimes called a small scale business, is a business that employs a small number of workers and does not have a high volume of sales.

Such enterprises are generally privately owned and operated as either sole proprietorship, corporations or partnerships. The legal definition of small scale enterprise varies by industry and country (Hearst Newspaper, LLC 2016).

Some countries defined it in terms of manpower. Some defined it on the basis of management structure. Small businesses have fewer employees and or less annual revenue than a regular sized business or corporation.

Small businesses can also be classified according to other method such as shipments sales, assets or by annual gross or net revenue or net profits ,the number of employees is one of the most widely used measure(Wikipedia).

The impacts or importance of small scale businesses is majorly felt in the economy of a country. Small scale enterprises plays important or significant role in the economic development of any nation especially the developing ones (Enudu, 1999).

See also: Gender as a Factor that influences the Performance of Small Scale Businesses

The growth of the country depends to a large extent on the standard and development of small scale business. In revolutionary economy, small scale enterprises are a legitimate and liable component in any strategy for reconstructing the economy.

Importance of Small Scale Businesses

The importance of small scale businesses in economic growth and development are highlighted below.


Small scale business has come to be known as major source of employment. It employs the majority of all non-government workers in the country and this trend seems to be on the increase.

Employment in Small Scale Businesses
Employment opportunity in Small Scale Businesses

Enudu(1999) stated that in Nigeria today, small scale business have offered employment to young school leavers and retired civil servants. Okafor (1996) posits that documented evidence suggests that about 30% of the entire working population is employed by small scale enterprise.

These shows that small scale business plays an important role in reducing the rate of unemployment in our country.


Small scale enterprise act as a check against monopoly and encourage competition, through improved prices and services to customers.

The small entrepreneur is in intimate contact with the market needs. Possessing practical technical competence is very necessary in competition.

A small firm cannot of course compete with large firm across the board. But a number of small businesses, each competing in its own particular area and own particular way, together have the desired competitive effect


Every business has its starting points, small business serve as a nursery for entrepreneurial talent and they grow, in some cases into large enterprises. Many large organizations all over the world today started as a small business, many computer industry leaders began as “tinkerers”, working on hand assembled machines out of their garages. Microsoft is a prime example of how a small business idea can change the world.


Small manufacturing establishments have advantages in meeting highly specialized or individualized demand or in catering to a small volume of market or one requiring frequent readjustment because of style changes or for other reasons.

See also: Differences and Similarities between Male and Female owned Businesses

Large firms with high overheads must produce high level of output to spread cost. By contrast, small firms are able to make a profit on much lower sales figures.

They can therefore sell into much smaller market. Small business therefore stands as the bedrock of every growing and grown national economy, majorly the growing economy.

Small business is as important as the heart-beat of the economy of the nation and the world at large. So the need for small scale businesses cannot be over-emphasized.


Contributor: Temiloluwa Olaposi




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