What is a small business entrepreneur?
A small business entrepreneur is one who sets goals and makes strategic decisions about the resources, management and administration of the business. They are commercially and legally accountable to third parties.
What type of enterprise is an SME?
To define the term “small business entrepreneur”, it is first necessary to explain what a small business is.
A small enterprise may fall within the definition of an SME. An SME is an enterprise that does not have significant market power and does not require a large amount of capital for its operation.
The definition of an SME is set out in Annex I of Commission Regulation (EU) No 651/2014. The criteria for qualifying as an SME are the number of employees, turnover and annual balance sheet total. The aim of this definition is to ensure that only truly small companies have access to European aid and schemes that benefit SMEs.
Small and medium-sized enterprises are as follows
- A microenterprise is an enterprise with less than 10 employees and an annual turnover or balance sheet of less than EUR 2 million.
- A small company is a company with fewer than 50 employees and an annual turnover or balance sheet of less than 10 million euros.
- A medium-sized enterprise is one that has fewer than 250 employees and an annual turnover or annual balance sheet total of less than EUR 50 million or less than EUR 43 million.
- The following criteria are used to determine whether a company is a small or medium-sized enterprise
Number of employees
The number of employees includes full-time, part-time, temporary and seasonal workers.
Annual turnover is determined by calculating the revenue generated by the sale of products or services during the year, before deducting the discounts applied by the company. Turnover does not include Value Added Tax (VAT) and other indirect taxes.
Annual balance sheet
The annual balance sheet shows the value of the company’s main assets.
Click here if you want to see the difference between an SME and a start-up.
Requirements for setting up a small business
To start up a small business and become a small business, the following characteristics are required
- Passion and drive: doing what you love and working hard to achieve your dreams is the best combination for success.
- Resilience, tenacity and ability to adapt to new situations.
- Creativity, innovation and ingenuity: the first priority is to be clear about the added value we offer to potential customers. This is why customers buy from us as a small business entrepreneur and not from others, and it is our competitive advantage.
- Planning and analysis: it is not enough to have an idea or a solution to a social need, but it is necessary to put it into practice and to carefully analyse the environment and the feasibility in our business plan.
- Social and communication skills: to spread your ideas and get noticed, you need good communication, negotiation and networking skills.
Build a good team.
Types of SMEs in relation to other enterprises
SMEs come in all shapes and sizes, but in today’s complex business environment, they often have close relationships with other companies.
- Sole proprietorship This is a business entity owned and managed by the owner of the SME; there is no legal distinction between the owner of the enterprise and the enterprise.
- Social entrepreneurship (partnership). In social entrepreneurship, the assets of the company are separate from the personal assets of the partners.
- Ordinary companies and limited liability companies. These are companies in which the business or civic activities are carried out in the name of a single legal entity and the partners are liable for debts that cannot be paid out of the share capital.
- Limited Liability Company (SA). A company in which the capital is divided according to the amount invested by the shareholders.
- Limited Liability Company (SRL or SL). Unlike a limited liability company, the capital is divided equally.
- Worker-owned companies: worker-owned limited companies (SAL) and worker-owned limited liability companies (SLL). Trading companies in which the majority of the capital is owned by workers who provide paid, personal and direct services and in which there is a permanent employment relationship.
- A worker cooperative. A company formed by professionals in the same profession who jointly manage the work carried out by different partners.
Advantages and disadvantages of small entrepreneurs
Starting a new business can be an exciting venture with many benefits, but also many challenges. Here are some of the advantages and disadvantages of small businesses.
Technological progress and the development of the media have brought benefits and opportunities to society.
Advantages, opportunities and threats in business.
Society can use technological progress to achieve growth and prosperity. On the one hand, technological advances can be overcome, even if only to the extent possible. On the other hand, lack of access to new technologies and means of communication can be an obstacle. Competition is possible.
Moreover, borders are disappearing as a result of the new global era in which we live.
The global era brings us closer to our distant competitors.
We are getting closer thanks to extensive media coverage.
SMEs have important advantages, such as the adaptability of being small and the ability to specialise
That is why we offer a “direct type” service, a small-scale structure that specialises in each market niche.
One of the greatest strengths of small and medium-sized enterprises is their ability to quickly modify their production structures when circumstances change.
Larger companies find it more difficult to restructure in the face of changing market demand.
It is difficult for large companies with many employees and a large amount of capital invested.
However, entering into these niches and small customer segments can be risky.
Entering these niche sectors and narrow customer segments increases the risk of failure for these companies.
It is therefore important for these companies to expand their market and customer base.
Financing Smaller companies are harder to find.
Smaller companies are harder to find.
Advantages of a small business
You have more control over your business. Micro and small businesses are easier to manage. The small size of the business makes it much easier to manage and analyse the results.
Specific aid and subsidies for SMEs.
High adaptability to change. In business, change is normal and desirable. Small businesses are able to adapt to change with more room for manoeuvre than large businesses, which are slower to change.
Proximity to customers Building strong and lasting relationships with customers is one of the main goals of every entrepreneur. As a small business, you can tailor your services to your customers.
Employee engagement In small and medium-sized enterprises, connections and relationships between employees are more personal and intimate. These relationships provide employees with a greater sense of belonging to the company and maximum commitment to their work. This approach leads to increased employee productivity and efficiency.
Disadvantages for small entrepreneurs
Greater responsibility. A small business means that almost all the responsibility lies with the entrepreneur. For example, the entrepreneur will be responsible for paying taxes, insurance, employee costs, rent, etc.
Financial risks. In the case of SMEs, capital is usually raised from the entrepreneur’s own funds or from other sources and the responsibility for repayment rests with the entrepreneur. In addition to the success or failure of the business, the entrepreneur also has a responsibility to be a good manager, influencing not only his or her own interests but also the work of others.
Difference between an entrepreneur and a small enterprise
These two terms are sometimes used interchangeably. They both own their own businesses, but have different management styles and philosophies. It is not that one is better than the other, they are just different. How do you fit into these scenarios?
Small businessman has a good idea
They solve a problem in their community. They know their business and their target audience. They know what will make their customers happy.
Entrepreneurs have great ideas
It is a great idea that has not yet been tested, diagnosed or worked on. They are very excited because they often don’t even know if their idea will work.
Stable small entrepreneurs.
They want to know what comes from behind and where it comes from. They think carefully about their decisions and the results are obvious. The results may not be good, but they usually keep growing.
Entrepreneurs like to take risks.
They take risks in their own way. They jump into business with both feet, knowing that if they work hard, the risk will pay off.
Small business owners think about what they have to do to get through the week.
They have a list of daily and weekly tasks. They have to manage staff, work with clients, network with new clients and keep everything moving.
Entrepreneurs think six months ahead.
When your teams think about what they have to do this week, they tend to overlook what is happening now and focus on the future of the business. They have the people to run the business, and if they don’t, they will soon.
Small business owners are very attached to their business.
They would never consider selling or handing over their business to someone else, unless it was a family member. They like to make decisions and manage the day-to-day running of their business.
Entrepreneurs are expansionists.
They grow because they want to grow and, although they do not intend to sell the business, they organise it so that it can function without them. They surround themselves with experts and can manage from anywhere.
Click here to find out how your company can be entrepreneurial.
The country needs small entrepreneurs to keep the economy going; it needs entrepreneurs to drive the economy forward. One is no better than the other. But the question is different. Are you a small business owner or an entrepreneur?