3. Business Success or Failure Factors in SMEs
Smes internationally are a remarkable size because of their large number, but mainly because of their
contribution to employment. Nevertheless, role of smes in economy is often underestimated because of image formed for them to have a reduced role in economic activities, in relation to large business, especially multinationals, but also difficulty in estimating their number (Curran & Blackburn, 2001). Some common characteristics of sme - not exclusive, nor definition – are that owned by an individual or a small group of people exercising managerial role and financing business since it is usually difficult raising funds. Also, smes are labour intensive, have inadequate distribution networks and market information, shortage of skilled labour, and their R&D depts. do not exist or have limited role. They may be established and easily enter the market but high infant mortality in businesses is presented (Bourandas & Papalexandri, 1998).
Creation factors of an sme are related in economic, social and psychological parameters. The differences between successful and unsuccessful smes are few (Lussier & Corman, 1995). International literature identified specific factors they lead smes to actual failure or success. Of course, different authors contribute in many ways to specific literature, since different factors were identified, maybe conflicting, but ultimately there is no definitive cataloging, which is rather natural if we take into consideration the complexity of smes. Main factors mentioned in international literature are as follows (Lussier & Corman, 1995):
Capital. Smes beginning their life underinvested have increased chances of failure compared to those with sufficient investment. But in many countries, fundraising for smes remains a major problem in primary and secondary sector (Zaridis, 2006).
Record keeping and financial control. Increased chances of failure for smes do not do so.
Industrial experience. Smes, managed by persons possess it, have more chances of success.
Managerial experience. As above.
Planning. Small or medium-sized businesses that do not have developed a specialized business plan face manychances of failure.
Professional advice. Smes using it face higher chances of success.
Educational level. Entrepreneurs that received university level education have higher chances of success.