If you’re bored with your job and want to try something new such as starting a business from the ground up, then hold up. Starting a business is a giant leap into the unknown. Before jumping on this ownership bandwagon, you should ensure that you gather all of the relevant information and understand the different types of small business structures and which would be best suited to your needs.
This article will cover the different types of small businesses and how they are classified, along with relevant examples and ideas.
Categories of small business
The small business units fall into one of the following categories of small businesses based on capital invested.
1. Small-scale industry
Small-scale industries are also known as micro, small, and medium enterprises (MSMEs). These industries make a one-time investment in machinery, plant, and equipment. The total amount invested does not exceed Rs. 10 crores, and their annual revenue does not exceed Rs. 50 crores.
However, the small and micro-scale industries came under the MSME Act in 2006 after the government passed the MSME (Micro, Small, and Medium Enterprises) Act. Various enterprises fall into this category of small business, like manufacturing sports goods, soaps, electric fans, footwear, sewing machines, and handloom weaving.
2. Ancillary industries
These industries are responsible for making the components that heavy engineering industries need to shape their finished product for final consumption. The result is that heavy industries can invest elsewhere and save money by eliminating the need to produce each part and component. The advantage of this type of small business is that their products have a guaranteed market, technical support is available, and parent units have improved technology.
A perfect example of this type of small-scale business is producing engines for the aircraft industry.
3. Export units
Units that focus on exporting their entire product line are known as export-oriented units. These export units are allowed to import any kind of goods, including raw materials, capital goods, office equipment, consumables, etc., to create export goods without having to pay duty.
This type of small-scale business gets recognized as an export unit only when its exports account for more than 50% of its total production. It can accept rewards from the government, such as export bonuses and other grants for exporting units.
Since India is the world’s top producer of spices, owners of such small businesses focus primarily on exporting spices and tea. Plus, the export of spices reached arecord high in 2020–21 in terms of value and volume, growing by 17% in US$ value terms and 30% in volume terms.
4. Small scale industries owned by women
The time when women would spend their entire lives in a house with four walls is long past. Women today are writing new tales of unprecedented success, just like their male counterparts, using their wit and diligence.
The company must be owned or operated entirely by women or in which they hold at least 50% of the shares. Such companies can apply for low-interest loans or government grants.
The Indian government’s constant push for more female entrepreneurs has given them access to different types of small business opportunities. Making paper or jute bags is one of many types of small businesses they can undertake.
5. Tiny units
An industrial or commercial enterprise with an investment in plant and machinery of less than Rs. 25 lakhs is referred to as a “tiny unit.” The Indian government has taken several actions to support them.
These types of small-scale businesses are exempt from the requirement to supply 50% of their output to their parent organization.
You can see that this category includes different types of small businesses, including boutiques, photocopy shops, STD booths, and small shops.
6. Service industry
Another different type of small business is the service industry. A company that performs work or provides a customer with a (typically) intangible good but is not engaged in manufacturing is said to operate in the service industry. In most countries, the role and goal of the service sector are to offer specialized instruction, advice, maintenance, and repairs to regular people who lack those technical skills.
Compared to industrial or agricultural societies, economies focusing on the service sector as their primary source of income and currency flow are typically more developed.
A chef, for instance, offers the service of preparing delicious food for clients—a talent that many regular people lack.
7. Cottage industries
One of the world’s oldest and most pervasive cottage industries is found here in India. The industry’s dynamic and diverse products out onto the market reflect the nation’s diversity.
These production facilities use low-tech, conventional methods to produce goods and services. These businesses also generate a sizable amount of foreign exchange and suitable employment. This type of small-scale business in India is most common because the owners can conduct it from their homes.
Examples of cottage industries are mat, coir, and basket-making industries.
8. Village industries
Village industries are primarily concerned with simply processing local raw materials for local markets. They are involved in the production of goods or services where the use of power is not required. Village industries invest a maximum of Rs 50,000 in fixed capital.
In 2019-20, the turnover of Village Industries products reached Rs. 84,675.39 crores, an increase of more than 19% over the previous year, i.e., 2018-19.
Village industries include gur and khandsari, cane and bamboo basket making, shoe making, pottery, and leather tanning.
In conclusion
As a result of their widespread distribution without any locational constraints, small businesses provide products and services to individuals and other companies. Because they offer products and services, all regions can reap the benefits of industrialization, contributing significantly to the country’s growth.
You, too, can start your own small business and get a business loan with Tata Capital. Tata Capital offers multi-purpose business loans at low-interest rates to make it easier for you to achieve your business goals.
To apply for business loans online, visit our website now!
16 September 2022
5 mins read
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