Problems and Solving Ways of Small Scale Enterprises in Bangladesh
Subject: Entrepreneurship Development | Topics:

Small business

Small business means the size of which is not big- the size again depends on the yardstick one uses to measure. Small business is an integral part of the total business scene in any country. Though small in size such business activities cover almost any area of business via manufacturing, mining, wholesaling, retailing service and the like. It is now well recognized that small businesses are the largest employers with lower investment per job. That apart, the growth & development of medium & large industries is mostly dependent on the small business. Small business occupies a vital place in the national country.

Small business has been defined by various authors in various ways. Some definitions are given below:

Small business Act

“A business which is independently owned and operated & not dominant in its field”

Bolton Report

“A Small firm in one that has a relatively small share of its market”

Stoner, Freeman &Gilbert

“Small business refers to business locally owned and managed, often with very few employees working at a single location”

United States Government

“A small business is one with fewer than 500 employees.”

Types of small business

There are six different types of businesses into which most small businesses fall. A given business may be active in more than one type simultaneously, although one type will usually predominate. The six types are

  • Retail sales
  • Services
  • Finance
  • Agriculture
  • Wholesale
  • Manufacturing

Small Business classifies the following types of business as small if they meet the criteria listed below.

 Manufacturing firms

  A manufacturing firm is classed as small if it has 250 employees or less. Manufactures take row materials and change into finished goods for sale.


Service firms with annual receipts of $2 million or less are classed as small. A service provides service s for customers, and types of service firms including hotels, barer and beauty shops, all types of repair shops, plumbers, and electricians.


Wholesalers with annual receipts of $9.5 million or less are classed as small. Wholesalers buy resell merchandise ell in significant amounts to final consumers.

Research & Development

Firms engaged in developing newer methods, techniques of production, sales and software system can serve others who are in need of those.


Consultancy services with regard to efficient management, project appraisal, raising sources of finance, methods of reducing risk, technical and engineering service etc. are provided through these types of firms.


A retail firm is small if it has annual receipts of $2 million or less. A retail business is one that buys goods from suppliers and sells them to consumers. Typical kinds of retail firms are food stores, clothing stores, drugstores.

Structural Feature of Small Business

structural Feature of Small Business

Figure: Structural Features of Small Business.

Structurally small Business may vary depending on skill, location, and otherwise. This may be seen as under:

Forms of the small business

There are three basic forms of business organization methods: the sole proprietorship, the partnership, and the corporation. With only a few limited exceptions, any type of business venture can use any form of organization. The factors that will affect the business form chosen are:

  • Easy of formation.
  • Exposure to financial risk.
  • Tax treatment of income.
  • Continuity of business upon death of owner.
  • Flexibility- possible to accommodate change.
  • Simple in arranging capital – depending the size & nature of business.
  • Nature of liability- Limited\ unlimited.
  • Legal formalities required- simplest- sole-trader ship.
  • Maintain business schedule.
  • Profit earning projected for self.
  • Tax consideration.

A Comparison of Three Forms of Business Organization

The mostly adopted forms of business organizations are sole proprietorship, partnership and corporation or public limited companies. There are distinctions among these three. Points of comparisons among the three forms are:

Characteristics of small business

There are various essential characteristics of small business .By characteristics small business are different form of medium and larger business organizations. The widely identified characteristics of small business may be seen as under:

 Managed by the owner

  • Decisions are taken at one point
  • Little or no delegation of authority
  • Verbal communication
  • Independently run/managed
  • All risks borne by the owner
  • Extension of the entrepreneurs’ personality
  • No separate entity

Family workers and fewer hired workers

  • Mostly owner financed and limited borrowed funds with no excess to the share market [no public issue]
  •  No scope for specialist service
  •  Little emphasis on long term planning
  • Close labor –owner/management relations.
  •  No or limited innovative production /marketing
  •  Business is housed in small establishments
  •  Rational cost control possible
  •   Maximum possible safety of business secret
  •   Local market and limited non-local market
  •  Size of investment is relatively smaller
  •  Volume of sales relatively smaller [limited market share]
  •  Unable to adopt modern technology
  •  Mostly handicraft with no use of electricity
  • Requirement of minimum legal formalities

Role of Small Business

Small businesses play a significant role in the socioeconomic development of a country .Irrespective of the systems of the economy, growth stage of the economy, place of industry in the economy, use of skills &technology in any country small business play an important role which none of the concerned people dare to undermine. Important ones of such roles of indicated hereunder:

  • Large industry wastage/by –product can be put to use
  • Desired industrial spread &Decentralization is facilitated
  • Business/industry diversification is made easier
  • Innovation for new products / services are made
  • Development of new technologies with regard to methods, inputs &skills are silently undertaken
  • Ensures wide competition &thereby provides reasonable price advantage to customers
  • Promotion & development of entrepreneurship are facilitated
  • Contribute in raising the GDP of the country
  • Enable equitable distribution of income among persons & reasons
  • Make better use locally available skill, expertise & technical know-how
  • More personalized contacts possible with all customers, suppliers, employees & others interested in the business.
  • Explore innovative marketing at home &abroad
  • Act as seed bed for new venture
  • Help in foreign currency earning  personalized push exports
  • Help in correcting  some of the problems created by unplanned urbanization
  • Provide an honorable alternative livelihood in a land starved/scarce country.
  • Traditional indigenous technologies are kept alive through adaptation
  • A controlling factor over big business tendency toward monopoly
  • Greater community life
  • Development of leadership in the field of business, society & otherwise.
  • Large number of small investors can become owner of such businesses.
  • Large number of low cost job opportunities can be created.
  • Act as backward linkages of the relatively large industries.
  • Cost effective product large number of ion possible.
  • Unutilized natural resources can be brought under productive use.
  • Easy supply of needed goods \ services is facilitated.

Scientific Inventions by Small Business Entrepreneurs

Though small in size but small business and their entrepreneurs are big with large potentiality. This they had already Shown not only by their important roles a above but they have also innovated & developed many revolutionary inventions a under:

  • Automatic transmission
  • Air conditioning
  • Mercury dry cell
  • Ball- point pen
  • Digital computer
  • Penicillin
  • Polaroid camera
  • Streptomycin
  • Magnetic recording
  • Petroleum core cracking
  • Oxygen steel marketing process
  • Titanium
  • Zipper
  • Cotton picker
  • Power steering
  • Magnetic core memory
  • Color photography
  • Flexible soda straws
  • Turbojet engine
  • Vacuum
  • Xerography
  • Cyclotron
  • Laser
  • Fiber optics
  • Insulin
  • Heterodyne radio
  • Self- winding wristwatch
  • Dacron polyester fiber tube cellophane
  • F m radio
  • Hovercraft
  • Prince tennis racket
  • Shell molding

Small business grows in large number but these businesses also fail in large number. If the secrets of there success are known to the concerned people including the responsible government officials, these can be nursed and strengthened in order to reduce the number of small business failure. Secrets of small business success   and the factors responsible for small business failures may be seen as under.

Keys to success

  • Determining appropriate cause of action for failure
  • Right personnel
  • Skill workers
  • Alternative location
  • Benefits of first startup
  • No competition
  • Reliable database and scientific record keeping
  • Mobilizing adequate amount of capital
  • Ability to extract favor of needful persons
  • High Govt. Official
  • >chamber executive
  • Top political leaders
  • Key bank personnel
  • In appropriate course for future
  • Irrelevant personnel
  • Un skilled workers
  • Working business location
  • Starting business with too many competitors – In appropriate /non reliable data base and unscientific record keeping
  • Scarcity / Surplus capital
  • No good connection
  • Traditional minded and lack innovation
  • Obsolete production
  • Obsolete machinery
  • Starting business without previous experience
  • Obtaining professional consultancy benefits
  • Proper and up to date record keeping
  • Remain sensitive to all the internal and external changes affecting the business
  • Training in the line of business
  • Appropriate knowledge about the market
  • Remain careful to take appropriate steps in right time
  • Ability to recognize & face limitation
  • No / irrelevant training in the line of business
  • Lack of knowledge about the market and demand
  • Chronic disease/death of promoter or key personnel
  • Conflicts among the heir after death of main of promoter
  • Machine break down
  • Cruelty and Uncompromising behavior
  • Inconsistency of policy /promises and commitment
  • Low quality product
  • Low salesmanship & channel of distribution
  • Natural calamity accident
  • Unhappy family life
  • Addition to alcohol. drugs and Ws[Women. wine etc.]

In spite of various types of problems, small firms can compete vigorously in many industrial areas. Indeed, their smallness gives then a number of competitive strengths. When exploited skillfully, these strength enable them to “carry the track” to large firms. Three are these strong points are discussed briefly below-

 Knowledge of customer and Market

The bureaucratic structure of a large cooperation tends to isolate its management from customers and markets. Salespeople have regular contact with the marketplace but their thinking is several steps removed from the influential decision –making levels of the corporation.

Flexibility in Management:

Big business is often pictured as being uniformly more efficient than small business. Some people believe that small business exists because it is protected through government aid on one form or another or because high business has not yet entered a particular field.

Small Business in Bangladesh

In Bangladesh we can observe a vast number of small scale enterprises. We can see it from the nearer road to the highway. But what are the real conditions of them. Most of them are building up in personal initiatives. Government has no specific policy to help those peoples and for these short of sector.

There are lots of problem in the small scale enterprises but there is no one who can help this sector. All the possible efforts are taking by the individuals. In Bangladesh the small scale enterprises has great performance in our total economy. Some supply of our total government revenues comes from this sector. A specific amount of our food, clothing, housing and this short of basic needs are filled up by the directly and indirectly by the small scale enterprises.

Overall view of our small scale enterprises are that most of our small scale enterprises are build up by the sole proprietorship and some of them build by the partnership. But the number of the people and small scale enterprises are not interested in the privet limited company or public limited company where the scope of business is more here and the opportunities of business is greater. Where an individual is solving problems and here a group of people are solving the problem. So in the question of small scale enterprises it obviously will bring the more effective result in private or public limited company than the sole proprietorship and so on.

Our government should take some initiatives to improve the overall condition of small scale enterprises in Bangladesh. They can help in various which will be mentioned on the latter part of the report.

 Some small scale enterprises in Bangladesh are mentioned bellow-

  • Grocery
  • Wholesale
  • Handloom
  • Small factories
  • Hospitals
  • Fisheries
  • Food processing
  • Consulting business
  • Rent-a-Car
  • Different showrooms of different brand product.
  • Franchised business
  • Ad firms
  • Picture studios
  • Computer firms

Problems in developing small scale enterprises in Bangladesh

There are a huge number of problems in the question of developing small scale enterprises in Bangladesh. Maximum small scale enterprises are owned by the individuals and an individual has obviously some limitation. Per capita income of our people is low and for this reason our people are not being able to generate adequate capital to run the business efficiently.

Human resources of our country are not skilled this is a problem with developing small scale enterprises in Bangladesh. The economic environment of our country is not hundred percent suitable for operating the business another cause of the restrictions.

Excessive import of foreign product in our country is another reason cause when the people of the country will be mainly dependent on the imported product then the entrepreneurs will loose their interest to develop small scale enterprises.

Political instability of our country is another reason for developing the small scale enterprises rate slow. Political environment of our country is not suitable enough to run the efficient business in our society.

Public moral is getting down means most of our people are loosing their moral and for this reason developing small scale enterprises in Bangladesh is not so easy lik the other country of the world.

Security reason is a strong reason which is effecting the developing of small scale enterprises in Bangladesh. Government are not being able the proper and adequate security to the citizen of the country this is directly effecting the developing speed of the small scale enterprises in Bangladesh.

Support from the government and so also non government is not adequate in our country to develop small scale enterprises in Bangladesh. This is a major obstacle which is not helping our small scale enterprises to develop properly.

Policy to Solve the Problems

To solve the problem of developing small scale enterprises in Bangladesh the following policies may adopt to over come the problems.

  • Government should take the necessary initiatives to develop this sector.
  • Government should have a clear policy about the small scale enterprises in Bangladesh.
  • Loan and this short of facility should be make available.
  • Control the inflow of importing such product which have the opportunities to produce in Bangladesh.
  • Adopt extra tariff on importing the product which are producing in our country.
  • Make the political situation stable as much as possible.
  • Make the economic situation stable.
  • Provide both social and economic securities to the people.
  • Improve the human resources.
  • Making more entrepreneurs through proper training and loan facilities.
  • Make the people interested to start their own or family business.
  • Provide possible support to the small scale enterprises in Bangladesh.
  • Combine the smaller enterprises into one through the cooperatives and so on.
  • Developing small scale enterprises in Bangladesh through a proper long term planning.
  • Make arrange to export home made product or domestic product into foreign countries.


This was not at all an easy project to complete. Gathering information was also a difficult task. What ever the limitations were, I tried to make my best effort to overcome them and anchor safe.

No matter how good I do in designing the project but it’s the knowledge that I gather that remains me till the end and satisfies me.

At last, I hope that my attempt behind this project is a successful one and will surely bear the expected fruit.


Entrepreneurship small business and lives of successful entrepreneurs.

Problems and Solving Ways of Small Scale Enterprises in Bangladesh

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