Research paper small business failure
If they are could make a reasonable compromising , they successfully will continue their business.
Small Business Failure and Survey of the Literature - Joyce Berryman,
Meanwhile in order to survive they are supposed to struggle hard with different external, internal and compromising activities. If they could come over the raised problems they will survive, otherwise they would go bankrupted. The success or failure of a businesses is often dependent on overcoming a series of potential barriers, e. Yet in light of the substantial growth in self-employment, there has been little research into the experiences of successful and failure small businesses and many questions remain unanswered.
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To date there has been no systematic study of this group in the Ahvaz, which is one to the industrial and big city in the state of Khozestan in Iran. The preliminary study about the subject revealed that although the entrepreneurs in small industrial business in Ahvaz city are active in relatively similar environment but some of them after a while get bankrupted. This is the question why some of the entrepreneurs are successful but others are failed in continue their business.
For the purposes of this research, small business was defined as independently owned and operated businesses employing fewer than 50 employees. For measuring entrepreneurs successful in business there are a numbers of methods such as:, net profit after tax reduce, amount of tax paid during the last three years, rate of productivity input-output ratio , current assets ratio ratio of current assets to current debt , keep working since three years ago and active in the business, increase products, services and sale, increase business capital. In this study due to the difficulty of access to all those information and data, we use the last three indicators for measuring the performance of small business.
H successful entrepreneurs have better developed human resource indicators than failure entrepreneurs. H successful entrepreneurs have more suitable financial situation than failure entrepreneurs. H successful entrepreneurs have well organized and structured than failure entrepreneurs. H successful entrepreneurs have lower effected by informal issues than failure entrepreneurs. The methodological design of this investigative project was determined by the absence of any previous research into the experiences of small businesses, based in the Ahvaz city and khozestan province, during the initialization, start-up process and getting benefit.
A quantitative and qualitative approach was used to identify the needs of such individuals, the barriers and problems they had encountered, the means by which they had overcome such difficulties, and the sources of support available to them. Based on the findings of an extensive literature review, in-depth open-ended interview questions were developed and a preliminary investigation was conducted with a random sample of small business in the Ahvaz city The findings of these in-depth open-ended interviews, in conjunction with the literature, were used to design a preliminary questionnaire and interview.
A researcher based questionnaire to guide the data collection process were developed around four areas: 1 personal information of entrepreneurs , 2- employees information sex, age, education and skills level, way of selecting employees, employees training , 3- correct situation of company their customers, assists, facilities, and 4- main factors effected their performances With slight variations, this set of guiding questions served as the basis for developing instruments for interviews.
These guiding questions were pilot tested with a sample of 30, and further feedback was obtained from an advisory group in terms of content and wording. The modified versions for each of the instruments used to conduct interviews with various small businesses. All small businesses are categorized in 19 group based on the International Standard Industrial Classifications of all economic activities for Iran Economy.
We have done 14 semi-structured interviews with the entrepreneurs. General Director of industry and his chancellors in Khozestan state. Direct Observation also conducted to familiarize researchers with the contextual circumstances of the setting. A team of two researchers conducted all site visits. Prior to each interview, participants were informed about the purpose of their participation, the nature of the inquiry, and the intended use of the information.
To stimulate rapport neither between interviewers and interviewees, and to encourage candid sharing of experiences, all participants were assured confidentiality of their input, and no identifiers of particular sites, staff, nor of any of the participants in this study is used in this report. Interviews were tape recorded with the verbal consent of the participants. At this point, personal notes were taken to describe particular characteristics and further complement the information gathered on the site.
After site visits, the visiting team compared notes and exchanged observations on the characteristics of the site and events of the day to begin developing patterns in light of the questions guiding the case study design.
Finally 67 questionnaires were collected but some of them were incomplete so that we chose 53 fully completed one. We put the entire questionnaire into the SPSS program and analyzed them in terms of our hypothesis. In relation to the first three hypotheses the results revealed that among the management skills Human relation skills, Technical skills and Conceptual skills there was a significant relation between successful and failure entrepreneurs.
The results of three related hypothesis are summarized in table 1. As the table 1 shows both successful and failure entrepreneurs were agreed that weakness of technical and conceptual management skills are negatively affected the performance of their business. Table 1: results of Hypothesis related to managerial skills of entrepreneurs and their firms performance. To test this hypothesis we aggregate variables such as: education of small business managers, their major field, first job or second job, relation between their education and business activities, previous experience of managers in relation to their business.
Results of t-test for independents groups revealed that there is a significant differences between successful and failure entrepreneurs. Table 2 : results of hypothesis related to general abilities of small business managers entrepreneurs and their company performance. Table 3 : Education level of Small Business Managers and their company performance.
Table 4 : Major field of Small Business Managers and their company performance. Table 5: results of hypothesis related to jobs of Small Business Managers and their company performance. The results of interviews say that entrepreneurs concentrated to the importance of previous experiences and technical skills for running the small business.
One of the successful entrepreneurs in Electrical business mentioned that:. Actually, my family were involved with this business since ages ago, therefore I have a good experience of doing this business otherwise I would go bankrupted.
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One of the successful entrepreneurs in the filed of food industry in relation to the factors of his success emphasized on two related factors: personal experiences in the job and getting knowledge and. But I put myself at risk and paid too much to previous workers to stay for a short time with my business. After a while when I get knowledge of doing business personally I take over the job".
Mark Weaver and Covin, J. In fact, Individuals with business ownership experience believed that the obstacles to launch and continues a business could be overcome as compared to individuals without business ownership experience.
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Entrepreneurs personal and background characteristics such as education level, their main job, relation of their education with the company activities, previous experiences with the same business, ability to recognize market demand and regulations, consumer behaviors, and knowledgeable of the company costs and benefits are important in their management of the business. When we consider the education background of small business mansager we recognized that majority of them have not had enough education and training in relation to entreprunership.
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It seems that three attributes are extremely important in entrepreneurship education: the ability to identify or recognize a market opportunity and the ability to generate a business idea, service or product that seizes that opportunity, the ability to marshal and commit resources to pursue that opportunity while facing the prospect of risk, and the ability to create an operating business organization that implements the opportunity-motivated business idea.
Level of Education among the small business managers and their emploees in case studies was another variables which has been addressed. Although employees training and education indexes are considerable to run a business we realized that there is a significant differences between successful and failure entrepreneurs in Ahvaz industry.
In fact, failure small business managers have less attention to development their personnel skills. Mean of education for successful small business was 3. Table 6 : results of hypothesis related human resourse development of Small Business Managers and their company performance. A large part of being a successful entrepreneur is having the training and know-how to accomplish the venture.
This ultimately relates to the overall quality of education that a country can provide for its people. As table 7 show high percentage of the small business surveyed employed 1 to 5 person. Having a spouse or family member working in the business is fairly common in the small business sector. The survey shows this occurring in nearly 45 per cent. Table 7 : Number of employees of small business in terms of their sex and work situation. Age T0 18 years Above 60 Total Failure - 18 11 1 30 Successful - 8 10 - 18 Our data of the system of hiring and firing of small business in Ahvaz indicated that they are employing more casuals and contractors.
The main reasons for hiring casuals over permanents are: varying business income and work and to reduce costs, however a real barrier to employment in the sector is the view that it is difficult to find skilled and motivated employees for small business. This survey provides two basic messages for entrepreneurial education. First, it illustrates that there are substantial deficiencies in entrepreneurial knowledge among the small business managers and employees.
10 Reasons Small Companies Fail
Secondly, it indicates a clear recognition among these groups that true entrepreneurial education is needed. There is no doubt that the continuity and successful performance somehow is related to the company asessts and capital. Financial institutions are a significant source of supporting start-up and continue capital for entrepreneurs. In light of these findings, it is interesting to note that, both failure and successful entrepreneurs perceive access to financial support as a major barrier.
Different banks in Iran mainly provide the resources of supporting small business. The approaches taken by banks to small businesses was criticized heavily by successful and failure entrepreneurs. They believed that greater uniformity in services and rates would be of benefit to all those involved.
The way in which financial institutions allocate credit and loans was also felt to be discriminatory against small businesses. Plus, the decision to lend money was taken by someone who they felt was unqualified to determine whether or not they had a potentially successful business plan. This procedure brings down the risk of approaching business from the entrepreneurs and also bank system. Secondly, due to the bureaucratic processing of the entrepreneurs request, getting a loan takes a lot of time and makes the entrepreneurs disappointed. Inability to manage cash flow effectively is one of the main reasons entrepreneurs fail, or experience great difficulties in their first year of operation..
This situation frequently arises because of external factors beyond the control of the business owner, e. The majority of cash-flow difficulties appear to arise from customers particularly organization government failing to settle their accounts in accordance with the agreed credit terms.
This places small business owners in a very difficult situation, they cannot afford to upset their customers by continual harassment for money yet they cannot afford to allow such monies to remain outstanding. The worst offenders in terms of payment seem to be large government organizations, with the degree of difficulty in obtaining payment rising with the size of the organization. This may result from increasing bureaucracy in large companies, which delays payments simply because of the processes involved in settling accounts. However, this does not absolve them from their role in the potential destruction of many small businesses.
Large organizations should not be in the business of destroying other businesses and they need to have policies in place, which protect small businesses from such treatment. H successful entrepreneurs have well organized and structured their business than failure entrepreneurs. As the literature revealed majority of failure small business are face with managing skills weakness which part of it is related to entrepreneurs managerial skills, and other part is belong to government roles in supporting and protecting small firms.
But in terms of government role both entrepreneurs have the same problems. Theory very much complaining about the weak government support, advice, information, training and developing a reliable system of loan and links with the banks. Although the General director of Ahvaz industry mentioned new facility for small business owner but our sample were claimed that access to those facility is taking time and do not worth to go for that services.
Each business activate in a particular economy.