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What is Small Business? – Meaning, Features, Types

What is Small Business? – Meaning, Features, Types

Small Business Meaning

A small business that functions on a small scale involves less capital investment, less labor, and fewer machines to operate is known as the small business.

And small scale Industries and small business are the type of industries that produces goods and services on a small scale. And these industries play an key role in the economic development of a country. The owner invests once in machinery, industries, and plants or takes a lease or hire purchase.

Also, these industries did not invest more than one crore. Some small-scale industries are paper, toothpicks, pens, bakeries, candles, local chocolate, etc. activity mostly settle in urban areas as separate units.

Also Read: 4 Small Business Trends to Know for 2021

What are the Features of Small Scale Industries?


They take the single owner. So it’s also known as a sole proprietorship.


The owner controls all the management works.

Limited Reach

They take restricted areas of operation. So can the local shop or industry locate in one location?

Labor Intensive

Their holding on technology is minimal because they are dependent on laborers and the workforce.


Because they are small, they are open and flexible to sudden changes, unlike large industries.


Also, they make use of  local and immediately available resources. And they did better utilization of natural resources and limited wastage.

What are the Types of Small Business?

Its bases on capital invested, small units can divide into the following categories:

Small Scale Industry (Before 2006)

It invests in fixed assets of machinery and plant also which do not surpass one crore.

For export improvement and modernization, the spending ceiling in machinery and plant is five crores.

Ancillary Small Industrial Unit

The industry can hold a minor ancillary industry status if it supplies a minimum of 50 percent of its product to another i.e., the parent unit.

Also, they can produce machine parts, components, tools, or standard products for the parent unit.

Export Oriented Units

The industry can own an export-put unit status if its exports exceed 50 percent of its manufactures.

Also, it can opt for the payments like export extras and other grants award by the government for exporting units.

Small Scale Industries Owned by Women

An move operates by women entrepreneurs in which they alone and combines share capital minimum of 51 percent.

Such units can opt for special grants from the government. And with low interest rates on loans, etc.

Tiny Industrial Units

The Industrial and the company whose machinery and plant spending did not exceed Rs. 25 lakhs.

Small Scale Service

Meanwhile, it fixes asset investment on machinery and plant, keep out land and building, should not exceed Rs. 10 lakhs.

Micro Enterprises

It is a small sector.

Also, the investment in machinery and plant should not exceed Rs.1 lakh.

Village Industries

However, industries located in rural areas and manufacture any product that performs any service with or without power are called village industries.

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Also Read: What are Big Ideas for Small Business? – Specific strategies, and More

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