ENTREPRENEURIAL MIND
UNIT
MODULE 5&6
Lesson 5: The Business Life Cycle
A. Business As An Economic Venture
A business is always an economic venture geared towards the conduct of
activities for profit making and service motives. It is organized as a way to develop the
economic affairs of a place in providing products and services for consumption and
doing any such exchange for a profit. That is why, going into entrepreneurship is
recognized as the engine of a nation’s economy for it drives economic creativity, giving
rise to wealth and jobs and improve one’s standard of living.
The activities of business may include buying, selling, manufacturing,
merchandizing, advertising, promoting and other marketing schemes used in the
channel and distribution of goods and services to a particular market place, On this
condition, any business man can be successful in offering innovative products and
services that he feels to gain as the economic and social rewards of entrepreneurship.
B. The Four (4) Stages of Business Cycle
An Entrepreneur may be encouraged to go into different economic ventures at
his own personal choices that could lead him to the use of the factors of production
effectively. The profits accruing to his favor are deemed limited at the limit of his skills
and industry. The said entrepreneur would also reap huge rewards, however, he could
also lose in the same exercise. The interest of any entrepreneur to an enterprise may
experience the following business stages:
1. Prosperity – is the stage in business where enterprises are rising in the
supply of goods and services. Most people in the society have more than
adequate money to buy their needs and wants. The exchanges of goods and
services are abundant to meet societal needs.
2. Recession – is the stage in business where enterprises are faltering to offer
goods and services in the community. The production of goods and the
offering of services are limited in scale and demand of goods is inadequate,
thus, prices escalate in the market area.
3. Depression – this is the stage in business where production of goods and
services have eroded to negative conditions. There is no supply and delivery
of goods to the market and people have nothing to acquire for their daily
consumption and the economy is declining in terms of income generation.
4. Recovery – this is the stage where owners of business are starting to recover
what they lost and generate more economic opportunities in terms of gradually
providing goods and services to the community. The economy is starting to
rise with more production of massive goods and owners start to earn huge
income. The society, in general is booming in terms of all economic activities.
Lesson 6: Doing The Small Business Enterprise
A. Small Business Definition
A small business is one which is independently owned and operated by the
entrepreneur. The term “independently owned” means ownership is held by a private
person and it is not of control in a sizeable share of its market.
The Magna Carta Law for Small Enterprises (R.A.6977) defines a small enterprise as
“any business activity or enterprise that is engaged in industry, agribusiness and/or
services, whether single proprietorship, cooperative, partnership or corporation whose
total assets, inclusive of those arising from loans, but exclusive of the land on which the
particular business entity’s office, plant and equipment are situated must have a value
of above P1.5 M to P15 Million.”
B. Types of Small Business
Small business may be classified according to five (5) types:
1. Small Manufacturing Business – a business that is involved in converting raw
materials into products needed by society. Examples are: printing press, garment
manufacturing, furniture shops, car assembly shop, vinegar and soy sauce
manufacturers.
2. Small Service Business – is a business entity that provides services in one way
or another and are also classified as business services, personal services, repair
services, entertainment and recreation, hotels and motels and educational
services.
3. Wholesaling – refers to those activities of those persons or establishments which
sell to retailers and other merchants. Examples are: softdrinks in local areas,
dealers of supplies and office equipment, grains wholesalers, etc.
4. Retailing – covers all of those activities involved in the sale of goods and/ or
services to the final consumers. Examples are: retail drugstores, the fastfood
shop, appliance stores, etc.
5. General Construction firms – are businesses engaged in the construction of
buildings whether for private individuals or for the government units. Many of
these perform subcontracting jobs for the bigger contractors such as installing
electrical facilities.
C. Characteristics of Small Business
Small businesses have their own distinctive features to include the following:
1. Independent management – the owner is also the manager
2. Small capital requirements – small businesses require only small capital
which can be supplied by single persons.
3. Mostly local operations – small business usually operates in certain localities
confined to local areas.
D. Economic Importance of Small Business
Small businesses play an important role in the development of an economy in
which they assume the following functions:
1. Providers of economic opportunities for entrepreneurs – people who are
not comfortable as employees have the option of engaging in small
business operations.
2. Providers of products and services to consumers – the production of many
products and services are oftentimes not feasible for big and medium
operators, thus these limited opportunities are naturally passed on to
small business owners.
3. Suppliers of products and services to other businesses – some
businesses require raw materials, semi-finished parts, finished
components, or even labor which they could not produce. Hence, the
small businesses perform this task for them.
4. Distributors of products and services to other businesses – some
manufacturers are not able to distribute their products and services, that is
why, small businesses assume this role for them.
5. Supporters of government – small businesses support the government by
paying taxes and perform other functions.
6. Providers of employment – a large portion of the labor force are employed
by small businesses.
E. Advantages of Operating a Small Business
An individual who runs a small business has options to improve his economic lot
as follows: He works as an employee, as a professional, and to be a small business
owner. He keeps long operating hours and absorbs whatever damages that may occur
as a result of his faulty decision making. However, he gets the following opportunities as
advantages in going to business:
1. the opportunity to gain control over his own destiny
2. the opportunity to reach his full potentials
3. the opportunity to reap unlimited profits, and
4. the opportunity to make a contribution to society and receive recognition
for his efforts.
F. Disadvantages of Operating a Small Business
Although, certain advantages accrue to the small business operator, there are
certain disadvantages that must be considered as drawbacks for his small business:
1. uncertainty of income
2. risk of losing his entire invested capital
3. lower quality of life until the business gets established
4. having to serve undesirable customers
5. more paper works to do
6. long hours and demanding work conditions
7. complete responsibility
