Economic significance of sole proprietorship and its sustainability of business data - African Association of Entrepreneurs (2023)

Economic significance of sole proprietorship and its sustainability of business data

The success of businesses in Ghana is largely dependent on their ability to make the most of their business data. This is because business data is a resource that can be used to make informed decisions, which can then be put to good use by the owner of the business. Business data is data that is generated by a business and is, therefore, information about a business. This information can take many different forms, such as financial data, sales data, and location data. to help grow their businesses.

The main objective is to highlight the role sole proprietors play in the economy and how utilizing the appropriate data can help sustain their businesses.

The questions the article seeks to answer are:

• What contributions do sole proprietors make to the economic growth of the nation?
• What kind of business information are available to them in this digital era?
• What are some of the factors limiting Ghanaian Sole Proprietors with regards to data collection and utilization?
• What forms of platforms or systems are available to them to utilize the information available to them to build and sustain their businesses?

1. What is Sole Proprietorship

A sole proprietorship is a business that is owned and controlled by an individual. There are no partners in the business. It is not a separate legal entity from the business owner (Twumasi). Minimal documentation and low set-up costs are two significant advantages of having sole ownership.

1.1 Contribution of Sole Proprietorship to the Ghanaian Economy

The majority of the businesses registered in Ghana are sole proprietors. Registering of Sole Proprietorship business in Ghana is genuinely straightforward. The statistical reports released in January 2020 by the Registrar General’s department, showed that 66,190 businesses owned by sole proprietors were registered in 2019. The table below shows the number and types of business entities registered in 2019 in Ghana at the Registrar-Generals Department (“News”).

Source: The Registrar General’s Department website, 13^th January 2020

It can be deduced from the above table that, out of the 92,265 business entities registered in Ghana, about 71.74% are sole proprietors. This reveals the significance of these types of businesses to the economic growth of the country.

The contribution of sole proprietors to the economy of Ghana can be measured in terms of their output and the size of their businesses. They contribute significantly to the economy of Ghana in terms of the goods and services they produce as well as the income they generate. The majority of sole proprietors in Ghana are into business ranging from manufacturing to trading (wholesale and retail), services to construction, and others.

Moreover, the contribution of sole proprietorship businesses to the Ghanaian economy cannot be overlooked. According to the National Employment Report released by the Ghana Statistical Services in 2015, nearly half (48.2%) of persons are engaged by establishments that are registered as Sole Proprietorship. The report also reveals that 65.9% of persons engaged by establishments that commenced operations between 2005 and 2014 are operating as Sole Proprietorships. The report further shows that Sole Proprietorship establishments engage the largest number of service workers (both permanent and temporary) making up nearly half (47.1%) of the persons employed in this sector. In the wholesale and retail trading sector, Sole Proprietorship establishments employ 70.5% according to the report (“National Employment Report 2015”).

The persons employed by these establishments, earn income, which they, in turn, pay direct taxes (personal income tax) and indirect taxes through the purchase of goods and services which increases the revenue base of the country.

• What Kinds of Business Data are available to Sole Proprietorships In this Digital Era?

The sources of data available to sole proprietorships to help them to grow their business include data about the business itself, such as financial data, sales data, and location data. These data can be used to make informed decisions about the business, which can then be put to good use by the owner of the business.

One of the most important aspects of a sole proprietorship that is often overlooked is the ability to collect data. Data can be collected through surveys, interviews, observation of customers, and social media platforms. One way to gather data by a sole proprietor is through the use of simple software. For example, one can use spreadsheet software such as Microsoft Excel and Google sheets to collect data about their business, such as sales figures and expenses. This is a simple way for a sole proprietor to gather basic business data. However, more advanced software can also be used to collect more sophisticated data, such as data about the performance of the business.

One important source of data that can be utilized by sole proprietors tremendously is social media data. Most Sole Proprietors in Ghana are seen advertising their products on Facebook. Most are found on Instagram reels showing off what they can offer their potential customers. Social media data mining can help the business to know the demographic nature of their followers, the time and day their followers are active, as well as their preference for videos or images of their product or service (Newberry). It can also give them an indication of the products mostly patronized by their followers and give them a fair idea of what to invest their time and money in.

• What are some of the factors limiting Ghanaian Sole Proprietors with regards to data collection and utilization?

One major factor that limits the ability of sole proprietors to collect and utilize data is a lack of access to appropriate technology. This is primarily due to the high cost of technology in Ghana. As such, sole proprietors in Ghana are often forced to choose between investing in technology and investing in their business. This often results in sole proprietors choosing to invest in their business and, as a result, they tend to be less well-off than their counterparts in other countries.

Aside from the cost of technology, lack of appropriate education in the use of the software also puts most of these business owners off since a sizable number of them are not highly educated. They also see hiring an expert to teach or assist them to be rather costly. They tend to lose very important data that could have contributed immensely to the growth of their businesses.

However, with some businesses, their problem is not the software or the education, but their poor attitude towards record keeping. Some of those who keep records do so in paper notebooks which makes it difficult for them to turn their data into business insights and take action to increase their profit (Jackson). Access to credit facilities becomes difficult due to inadequate or no data to present to financial institutions.

• What forms of platforms or systems are available to them to utilize the information available to them to build and sustain their businesses?

There are a few companies locally that have built software or platforms to help sole proprietors and other businesses alike to track their business activities as a means of encouraging them to collect data on their business.

One privately-owned business doing great in such a manner is OZÉ which was established in 2017. OZÉ is a portable application that assists independent companies with recording their business, costs, payables, and receivables (Jackson). The stage then totals that information to give certain explicit suggestions and reports ((Jackson). It also enables financial institutions to source business information on small businesses when assessing their application for credit facilities.

According to recent research (Jackson), so far, over 5,000 businesses have registered on the platform. Of businesses that record a transaction in their first week of using the app, 69 percent are still using it six weeks later.

However, more needs to be done because 5,000 businesses on the OZE platform represent only 7.55% of the total number of registered Sole Proprietorship establishments in 2019 (66,190) not to even talk of the ones registered from 2020 to 2021.

Conclusion

Sole proprietorship indeed contributes immensely to the economy of Ghana. However, more can be done by individuals and the government to ensure that data on their business is up to date to ensure their consistent growth and survival. In this digital age, collecting information on a business is not as difficult as it used to be years ago.

More training and support should be given to bring to the center the significance of data and its usage and finally its contribution to economic growth to the sole owner as well as the general public at large.

The government can come in by partnering with Software companies to subsidize the cost of some of this software to encourage small businesses to purchase them.

REFERENCES

(Visited 428 times, 1 visits today)