The development of small business in Russia

Russian small business has experienced the whole range of changes: the number of falls and a few comparative rises for more than 20 years of its postSoviet existence. Every new cycle of its development was full of initiatives and projects. That gave the owners of small business the new hopes for successful future. Despite this the change of stages in economy happened without any structural shifts. So the condition of constant changes has become the specific national feature of Russian small business formation. The current investigation of small companies' business climate has proved this fact.

The development of Russian small business can be divided into 3 main stages: the 1st stage (1991-1998) – creation and development; the 2nd stage (1998-2007) – stabilization and economic growth; 3rd stage (since 2008) - the beginning of economic crisis which led to small business “reborn”.

Since 2011 the attempts to support small business had been made and the number of small and micro organizations was growing little by little.

Nowadays under the conditions of sanctions, unstable macroeconomic situation, inflation and cheap loans, small business has a little chance to increase investments into it.

But still, despite all these difficulties, in the second half of 2014 the small business owners have turned out to be in a more beneficial situation than owners of medium and large organizations, as in the unstable economic environment the mobile and flexible organizations usually gain.

As we know the sanctions which were imposed to hit Russian economy resulted in the decision to impose embargo on import of western products. That led to necessity to develop national economy of the country and small business as a key factor. The connection of small business with imported products is not very important. As the import of some products is forbidden – small business companies involved in agricultural sector and meat production have the largest chances for the development. Besides that there have already been some shops targeted at selling products produced only in Russia.

Have sanctions influenced small businesses or not? According to the official web site of Russian business operators’ and manufacturers’ unity 48% of small business owners have noticed the influence of sanctions on their businesses, 39 % have not noticed yet and 13 % have had difficulties to answer this question.

It is also important to mention the factors limiting small business success:

• 1)    Increase of Costs of raw material

• 2)    Unstable economic situation in the country

• 3)    Lack of demand on home produced goods

• 4)    Constant growth of explicit costs

• 5)    The current system of taxation

• 6)    Expectations of inflation rate

• 7)    Prevailing rates of interest

• 8)    The shortage of qualified employees

• 9)    High transportation costs

Some measures have been proposed by the Russian government to manage some of these problems:

• 1)    Minimizing of interest rate for those companies which are involved in the innovational activity;

• 2)    Simplification of the procedure of providing loans to business operators;

• 3)    Protection of intellectual property rights;

Thus the political economic environment requires significant change, not so much in the actual regulations as in the balance given to them relative to other stakeholder groups and the will to implement existing policies. The results could make a huge difference, leading to either a continued fall in small businesses and the associated formal economy, or a quadrupling of their contribution to GDP in the next 10 years [1].