Survival and Growth of Small Firms
Survival and growth of small firms
Introduction
Peacock (2000) argues that small business is different from large corporations by small size and rate of turnover and failure rate. According to Small Business Association, two-thirds of newly founded firms can survive within the first 2 years and only 44 percent are still in business after 4 years. Lowe et. al (1990) argues that failure ‘exists between failing and growing small firms.’ It can be perceived as there are 2 levels to develop small enterprises. The first prime aim is to make business survive in a short term, and the final objective is to keep it growing in the long run. Churchill and Lewis (1983) illustrate a 5-stages model to develop business: (1) existence; (2) survival; (3) success; (4) take-off; and (5) resource mature. Failure to address the key problems of each stage will hamper organisations from growing (Hill, Nancarrow and Wright, 2002).
This essay aims to explore the reasons of failure and non-growth and forces lead to survival and quickly growth. The structure of the essay is as follows. Firstly, I examine the understandings of small ventures’ ‘survival’ and ‘growth’. Secondly, I analyse the reasons behind businesses failure through reviewing theoretical and empirical findings. Finally, I discuss the forces lead to success and fast-growth of businesses.
Survival and failure
There is still no commonly accepted definition of ‘failure’. When referring to failure, researchers use different expressions such as exist, closure, and bankruptcy etc. However, to some extent exist and closure do not mean true failure, as some owner may turn attention to invest in other promising industries or some entrepreneurs close business for retirement, or avoiding excessive debt (Headd, 2003). Watson and Everett (1993) have outlined 5 dimensions of ‘failure’ in their survey of retail start-ups, including (1) discontinuance of ownership--- businesses are sold to new entrepreneurship, (2) discontinuance of
Introduction
Peacock (2000) argues that small business is different from large corporations by small size and rate of turnover and failure rate. According to Small Business Association, two-thirds of newly founded firms can survive within the first 2 years and only 44 percent are still in business after 4 years. Lowe et. al (1990) argues that failure ‘exists between failing and growing small firms.’ It can be perceived as there are 2 levels to develop small enterprises. The first prime aim is to make business survive in a short term, and the final objective is to keep it growing in the long run. Churchill and Lewis (1983) illustrate a 5-stages model to develop business: (1) existence; (2) survival; (3) success; (4) take-off; and (5) resource mature. Failure to address the key problems of each stage will hamper organisations from growing (Hill, Nancarrow and Wright, 2002).
This essay aims to explore the reasons of failure and non-growth and forces lead to survival and quickly growth. The structure of the essay is as follows. Firstly, I examine the understandings of small ventures’ ‘survival’ and ‘growth’. Secondly, I analyse the reasons behind businesses failure through reviewing theoretical and empirical findings. Finally, I discuss the forces lead to success and fast-growth of businesses.
Survival and failure
There is still no commonly accepted definition of ‘failure’. When referring to failure, researchers use different expressions such as exist, closure, and bankruptcy etc. However, to some extent exist and closure do not mean true failure, as some owner may turn attention to invest in other promising industries or some entrepreneurs close business for retirement, or avoiding excessive debt (Headd, 2003). Watson and Everett (1993) have outlined 5 dimensions of ‘failure’ in their survey of retail start-ups, including (1) discontinuance of ownership--- businesses are sold to new entrepreneurship, (2) discontinuance of
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