“Why do approximately 70% – 80% of small businesses fail within five years? Why are certain entrepreneurs more successful than others?” (Extract from UWC article below)
Recent research by the University of the Western Cape on the rate of failure of small businesses makes for interesting reading and provides insights that we all really need to take on board, particularly in these hard economic times.
Globally 60 to 70% of jobs are found in SMMEs (Small, Medium and Micro-Enterprises) but in South Africa this figure is only just over 28% despite more than 95% of businesses in South Africa being SMMEs.
South Africa has a higher failure rate of SMMEs than elsewhere in the world (70% – 80% of our small businesses fail within 5 years). In previously disadvantaged communities only 1% of businesses progress from employing less than 5 people to having staff of 10 or more.
The research indicates that in terms of success factors, 40% can be attributed to the entrepreneur. The characteristics of this person are crucial and they need to show:
The factors contributing to failure are ones we are aware of:
There are others too like corruption crowding out legitimate SMMEs and low bargaining power.
Have a look at the 6 factors listed above. Maximise the positives, and do something about the problem areas. Remember, your accountant is there to help you succeed so don’t be shy to ask for advice.
Clearly the country is missing a sizeable opportunity to grow the economy and to reduce our 27% unemployment rate.
One way to get this going is through mentoring and training. Government programs are having a limited impact and there is space for business to also play its part. Why not interview some SMME owners and determine if they have the characteristics as shown above? Those that have the attributes can be successfully mentored to get good accounting records and systems, skills can be addressed as well as access to finance.
Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.