Issues in Small Business
Management
Topic 2
Definitions and Contributions
What is a Small Business?
“Rigorously defining small business has always been difficult, even controversial.” d'Amboise, G. and M. Muldowney (1988). "Management Theory for Small Business:
Attempts and Requirements." Academy of Management Review 13(2): 228-240.
Which definition?
Australia
Overseas
Regulatory (e.g. ASIC, ATO, ABS, etc)
Academic
What is a Small Business?
HISTORICALLY - AUSTRALIA
Less than 100 full time employees
(Wiltshire Enquiry 1971, ABS)
“20/100 rule”
(Beddall Inquiry 1990)
Less than 100 full time employees
(ABS, Yellow Pages SB Index)
SMEs upper limit - 200 full time employees
What is a Small Business?
QUANTITATIVELY - AUSTRALIA
Non Employing
Micro
Small
Medium
Large
Number of
Employees
Zero
1 – <5
< 15
5 – < 20
< 50
< 100
101 – < 200
200 or more
Revenue
Source
(ABS, 2007)
(ABS, 2007)
< $2million (ATO, 2007)
(C of A, 2009)
< $5million (ABS, 2007)
< $25million (ASIC, 2007)
Forsaith and Hall (2001)
(ABS, 2007)
(ABS, 2007)
Please Note: All business that are not Medium or Large are classified as Small
What is a Small Business?
Is Quantitative enough?
Three Firms – each with 14 FTEs
A – owned and managed by June and John
B – Franchise operation servicing washing machines C – Managed by Winifred and is a subsidiary of
BHP Billiton
Different researches will calculate quite divergent answers for the number of small businesses – are they wrong?
What is a Small Business?
QUALITATIVELY
Independently owned and managed
Closely controlled by the owner managers, who contribute most, if not all, of the operating capital
The principal decision making process rests with the owner manager
(Beddall Report 1990)
What is a Small Business?
Using our three Firms again
A – June and John – own savings plus bank loan
B – Paid $115,000 to service customers in a predefined area
C –BHP Billiton funded the subsidiary
What is a Small Business?
GROUNDED
An approach utilised by researchers/advisers
Commonly a combination of quantitative and qualitative.
Osteryoung and Newman (1993)
Not listed on stock exchange
Personal guarantees for finance
Peacock p5
Number of Businesses
F/Y 2007
Non employing
1-19
Total Small
20-199
Total SMEs
200+
Operating at end of financial year
8165.0 Jun 2007 to Jun 2011 Counts of Australian Businesses, including Entries and Exits
Businesses by Employment Size Ranges
F/Y 2011
59.6% 1,306,023
61.2%
36.1%
739,311
34.7%
95.8% 2,045,335
95.9%
3.9%
81,006
3.8%
99.7% 2,126,341
99.7%
0.3%
6,071
2,132,412
0.3%
Important?
Contribution
•Economic
•Social
Creation of Value -
2010
Business type and employment size
Sales and service income
($m)
Small Businesses
824,506
34%
-2%
4,747
47%
-7%
128,509
31%
Medium Businesses
591,440
24%
+12%
2,339
23%
+5%
108,034
27%
Total SMEs
1,415,946
58%
+3%
7,086
70%
-3%
236,543
58%
Large Businesses
1,023,333
42%
+11%
2,970
30%
+11%
170,377
42%
Total selected businesses 2,439,279
% from 2008
% from 2008
Employment
(‘000)
10,056
Wages and salaries
($m)
406,920
Cat No. 8155.0 Australian Industry: Business Type and Size by ANZSIC Division; Australia; 2009-10
Please note: Above figures exclude data on certain industry classification – total employment as at June 2010 (cat 6202.0) was approx. 11,057,300
Creation of Value
In Australia
“One of the key strategies … in Australia is to promote a dynamic entrepreneurial culture by improving the business environment for small and medium-sized enterprises (SMEs)
…concludes that a very small percentage of
SMEs are responsible for most of the employment generation and innovation in the small-firm sector.”
Parker R, Small is not Necessarily Beautiful: An Evaluation of Policy Support for Small and Medium-sized Enterprises in Australia, Australian Journal of Political
