Analysis : Resources And Failures Of Smes

Although so many businesses large and small are started every year, over 90% of businesses fail. Why is that?

Organizational failures and bankruptcies have become a highly frequent sight of present generation. Organizational failures is most commonly referred to as financial losses or stagnation of financial performance of an organization, however, it is a more comprehensive concept. Not being able to attain organizational objectives – no matter whether they are financial objectives or non-financial – is organizational failures. Internal workings of the organizations have long been a subject of study for management theorists, for what else can be more useful study than study of

“New research shows that the country’s rate of new business creation, which peaked about decade ago, plunged more than 30 percent during the economic collapse and has been slow to bounce back following the recession”(Harrison). In other words, 80 percent of small business fails within the first year (SBA). Small businesses are exclusive enterprises, organizations, or sole proprietorship's that have less workers and less yearly income than a general estimated business or partnership. While the rate of business development has hindered, the pace of business closings, which had held relentless over the earlier decade, began to rise in 2005 and spiked in 2008, according to data compiled by the Brookings Institute (Harrison). Consequently, business

Small businesses are the core of the engine that runs the American economy. They are a very intricate and essential part of what makes America strong. Annually there were approximately 400,000 new small businesses started every year in the United States of America. Before the recession the normal business closure for companies in America were approximately 100,000 annually. This rate of exchange between new and closing businesses is known as “the birth and death rate of American companies”. After the recession the death rate of businesses in the United States has increase exponentially, growing from 100,000 companies a year to approximately 470,000 companies closing annually (Joseph, 2014). Most may think this is a result of the recession,

Conclusion: This paper is intended to give clarity on the depths of small businesses, how they plan to succeed and get through possible adversity. The surviving mechanism it takes to maintain in a world where large businesses are expected to exist longer than small business.

Successful firms capitalize on economies of scale & scope, create management structures and invest in research & development

Regression analysis seems to be extremely useful in determining financial distress and the bankruptcy of firms. In fact, in a particular study conducted by Bredart in 2014, it was presented that regression analysis was able to show an 84% prediction accuracy rate in determining bankruptcy of 870 firms between the years of 2000 and 2012 (Bredart, 2014). The independent variables used in Bredart study included profitability (net income/total assets), liquidity (current assets/current liabilities), and solvency (equity/total assets) while the dependent variable included financial distress.

Business failure refers to a company ceasing operations following its inability to make a profit or to bring enough revenue to cover its expenses. A profitable business can fail if it does not generate adequate cash flow to meet these expenses. There are many factors that affect a businesses ability to succeed, including the consumer demand for the product and the surrounding competition within the operating market, however it ultimately comes down to the firms financial efficiency and its ability to cover

When the business has more work than it can handle is another warning of the enterprise not doing well. A lack of liquidity can also be a cause of business failure. Liquidity is the speed at which an asset can be converted into cash and if the company does not have enough liquid cash at its disposal, it can lead to their downfall. A new business venture that provides products or services at the cheapest price in a desperate quest for making sales is also a sign of struggle.

Small businesses are the backbone of national economy and play a leading role in innovations as well as in creating jobs. Small business has the intrinsic needs to growth. Obvious contributions of the growth of small businesses include the increased return on investment and job creation. The interesting and valuable question is how small business grows and are all small businesses growing? It is no surprise that the growth of business is a core topic both in organization theory and entrepreneurship, both are interested in the process and causes of business growth. Stages of growth models, which assume that business go through some distinct stages from birth to maturity, have been the most popular theoretical approach in academic to understand small business growth. Although the stages model of growth has been criticized for being too sequential and linear which is unrealistic and inconsistent with empirical evidence (e.g. Phelps et al., 2007; Levie and Lichtenstein 2010), various new stages models of business growth have been developed since the 1960s.

As defined Robert W. Rowden (Thunderbird International Business Review, March-April 2001), a small firm (with a maximum of 50 employees) is centralized and personalized through management of an owner-manager. This type of organization provides some advantage such as proximity between manager and employees because there is less hierarchy. Furthermore, internal information system is more simple than big companies, it allows an efficient sharing of ideas and to have an adaptability to the market changes. Yet, a small company doesn 't have the multinational 's human and financial resources to

A number of important studies claim the appearance of the stylized reality demonstrating that company size has been linked with company success and departure (Manj-Antol and Arauzo-Carod, 2008). Smallness has a tendency to maximize company departures (Grilli et al., 2010; Pez et al., 2004), because companies coming into the marketplace with a fairly modest level might face price drawbacks and bigger issues in being able to access capital as well as labour market segments in contrast to well-established companies. Nevertheless, many of us even now understand very little regarding the survival styles of companies while in a crisis phase.

3. Small companies are less efficient in operation will fail because it cannot compete with others.

If efforts are put towards promoting SMEs, particularly, the likes that are concerned with the informal sector, achievement of development that is sustainable is inevitable. Most developing as well as developed countries depend on the small and micro enterprises in the provision of employment. Even though a number of small and medium-sized enterprises are not part of the formal sector that is

Business failure refers to a company ceasing operations following its inability to make a profit or to bring in enough revenue to cover its expenses. A profitable business can fail if it does not generate adequate cash flow to meet expenses. Arditi (2000), defines the failure of a company as an inability to pay its obligations when they are due (Frederikslust, 1978).