Within all major economies, the role of the small business is significant; as such it is important to understand the factors associated with why some small businesses fail and why others are successful. For the purposes of this paper we will assume that a small business is a for-profit enterprise which is owned independently and does not hold a dominant position in the broader industry. There is widespread agreement that a nation's prosperity is linked with the performance of its small businesses, as entrepreneurship creates jobs, develops innovation and creates wealth. Unfortunately though being a small business owner is not easy as there is a statistic in the United States which that more than 50% of small businesses fail in its first year of operation and 95% fail within the first five years of operation. (Dun & Bradstreet 2004). This is a loose statistic, but it speaks to the greater issue of most small businesses failing within a short period of time after inception.
[...] However, as these articles revealed, there is a tough reality that most of the small businesses that start will not last past their first few years in operation. While there cannot be any one reason why businesses fail or succeed, there are determinants that can help judge how successful a business will be: resources. The more resources that a business have the more of an edge they have on other businesses that waver on the line between success and failure. From this essay it is clear that a significant determinant of small business success comes down to resources and [...]
[...] As for the reasons why it seems to fall along lines of gender, well that is an issue that is best left for another discussion. (Watson 2003, 262-77). In their article, Competitive Advantage and Entrepreneurial Power, Graham Beaver and Peter Jennings give their own accounts of the “dark side of entrepreneurship”. They argue that most businesses fail because they do not prepare for the adversity that they are inevitably going to face in the course of their business. Because of their “inability to adapt to a series of crises caused by business development”, along with mismanagement of other resources is crucial to success. [...]
[...] In the editorial entitled Small Business: Success and Failure, the author gives some more useful insight into why small businesses fail but their argument seems to fall in line with the greater argument that resources are important indicators of how well a business will do after it launches. They begin with the assertion that small businesses can and do take many forms, so one must be careful before grouping different types of small businesses into the same category. They note that a main cause of failure of the inability to cope with market changes in time for the owner-manager to realize that the situation has changed. [...]
[...] It can be seen from the overview of the various academic literature that there appears to be consensus among academic and business people as to what makes for a greater chance of success when it comes to running a small business. Remember that resources is a broad ranging term and is intended to encompass much more than just money. It argues that some of the causes of failure are linked with the skills of the owner-manager and other are more linked to environmental variables like customer attitudes, financials and competition. [...]
[...] Much of the literature indicates that success and failure of small businesses has a lot to do with preparation of the business owner. While there are many businesses that start based on a good idea, many of them are not implemented in a way that will be cost effective, sustainable and profit generating. People do not open up businesses with the intention of failing, but those who establish a direct plan for success, including contingency plans in case things go wrong, are usually the people that have better chances of success with their small businesses. [...]
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