The management of small industrial units have to face certain problems which are discussed below:

(i)    Shortage of Raw Materials and Power. The small scale industrial suffer from acute shortage of basic raw materials. For instance, the handloom industry is wholly dependent upon the supply of yarn which is generally in short supply. Beside, there is also a considerable lack of reliability in the quality of raw materials available in the market. Shortage of power is another factor which materials available in the market. Shortage of power is another factor which leads to under-utilization of plant capacity. All the small firms cannot afford their own generating sets to continue production during the period of non-supply of power.

(ii)    Inadequate Financial Resources. Every business enterprise needs sufficient funds to finance the purchase of plant and machinery, building, raw materials, etc., and to meet day-to-day expenses including wages, rent, power and water charges and administrative and selling expenses. Small firms are sometimes not able to raise sufficient money to provided for fixed and working capital. Shortage of funds is the most important factor which has led to the closure of many provide short-term and long-term credit to small scale sector have not proved to be adequate.

(iii)    Old Techniques of Production and Lack of Latest Technical Knowledge. Most of the small firms are using old techniques of production because they cannot afford new machines are equipment which are necessary for modernizing production. Thus, small business enterprises are not in a position to make use of the latest techniques of production. It is because of this reason that the cost of production of small units is higher than that of large scale units. The margin of profit of small units is higher than that of large scale units. The margin of profit of small units is usually law due to which they can neither compete with the large scale units nor undertake innovative activities.

(iv)    Lack of Trained Personnel. There is a lack of entrepreneurs with both knowledge and vision who can see development in true perspective and can spot a potential industrial opportunity, evaluate its soundness, and put together all the ‘building blocks’ of a project to make it a feasible proposition. There is not only a dearth of entrepreneurs with the requisite initiative, motivation and the seed capital, but also of personnel with adequate managerial skills and qualities. If such personnel are available, they lock for better opportunities in the large scale industries. Thus, small industrial unit get the personnel rejected by the large scale units.

(v)    Difficulties in Marketing. Small scale industries face many difficulties in marketing their products because of many reasons. Firstly, their cost of production is higher because of which they cannot compete with large scale units. Secondly, they cannot afford to have their own suitable marketing organization. Finally, many small firms manufacture goods which are not of uniform quality. They do not follow quality control because of which they cannot offer standardized products. This creates a problem in marketing. Sometimes, they have to sell their products oat throwaway prices because they have poor bargaining power and require money immediately.

(vi)    Imperfect Management. In most of the small enterprises, the ownership and management functions re not separated. They are performed by the owners of the enterprise. it generally happens that the persons who finance the business operations do not possess the necessary skills which are required for the efficient planning, organization, and control of various operations of the enterprise. There is no proper division of work among the people working in the organization. Such enterprises cannot reap the benefits of specialization as are available to big enterprises. Managing is no more a simple job. It requires a lot of knowledge, farsightedness and training which are often not found in case of small business units.

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