Although the role of small and medium-sized businesses in boosting the economy remains underestimated, truth is, they are basic contributors in the world economy and improve to a huge extent a country’s employment rate.
Small and medium-sized enterprises (SMEs) can be established and easily enter the market but “high infant mortality in businesses is presented”. But mainly, creation factors of a typical business are related to economic, social and psychological parameter.
Some of the major problems of starting an SME include the lack of available time for planning, business organizing, in addition to arranging entrepreneur’s ideas and thoughts about optimizing business functions.
But what factors lead SMEs to fail or succeed? Zaridis & Mousiolis (2014) suggest the following:
Business capital
SMEs that begin their lives underinvested are more likely to fail compared to those with sufficient investment.
Record keeping and financial control
The chances of small to medium-sized enterprises failure increases when it does not do so.
Industrial and managerial experience
SMEs that are managed by people who really possess it have more chances to succeed.
Business planning
SMEs that have a clear, developed and specialized business plan are the ones that will definitely succeed.
Professional advice
Undoubtedly, people starting their SMEs who take other professional advices into consideration have higher chances of succeeding.
Educational level
Entrepreneurs that received university level education have higher chances of success.
Personnel
Small to medium-sized businesses that attract and retain quality staff are most likely to succeed.
Election of appropriate time to provide products or services
SMEs that offer very young or very old products or services will most probably fail.
Economic circumstances
Entrepreneurs who start their small to medium business in economic recession are more likely to fail than others starting in economic prosperity.
Partners
Businesses established by two or more people are more likely to succeed than those established by one person.
Overcoming the obstacles encountered
Difficulty in overcoming obstacles like competition, technology, markets, production capacity, product range, level of entrepreneurs’ skills as well as product quality assurance will definitely lead to an SME failure.
High v/s Low Barriers to Entry
To begin with defining the two concepts, Tony Robbins clarifies that small to medium businesses might encounter challenges, or barriers, that are relatively straightforward to overcome; hence, low barriers to entry. On the other hand, the obstacles that cannot be solved without extensive resources are known as high barriers to entry. Accordingly, the survival rate of an SME with low barrier entry is low, while higher chances of survival exist when entry barriers are high.
Marketing
Owners of small to medium organizations who do acquire marketing skills have a greater chance of success.
Even though many other factors like state intervention policies, government funding, property, activity sector, geographic location, business type can affect SMEs’ success or failure, every business life remains related to how effectively every leader, along with his/her team, control, manage and overcome all business threats to overcome all SME barriers!
Sources
Zaridis, A., & Mousiolis, D. (2014). Entrepreneurship and SME’s Organizational Structure. Elements of a Successful Business. Procedia Social and Behavioral Sciences, 148 (2014), 463 – 467.
Tony Robbins. (2021). Barriers to Entering an Industry. Retrieved from What are Barriers to Entry? A Full Guide & Explanation (tonyrobbins.com)
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