Why are younger and smaller SMEs more likely to fail than their older, larger counterparts?



Why are younger and smaller SMEs more likely to fail than their older, larger counterparts? 

Notes for question: Key activities need to be identified and undertaken to ensure the success of a venture. Some need to be completed pre-launch, while some are key operational activities that derive from the business model and its core value proposition. The critical success factors are those key activities that must be get right to ensure the successful launch and day-to-day operation of the business. Most firms are born to stagnate or die and not to grow to any size. A business might cease to trade for many reasons, not all of them bad. However, when the sole trader, partners or company are insolvent then there are unpaid creditors. The main factors influencing the statistical likelihood of failure are age and size of business. The causes of failure involve a coincidence of external and internal influences that might occur simultaneously: 

External influences include: (a) The general economy, which SMEs cannot influence but has a large influence on them; (b) Luck and resource levels, which likens failure or success to a game of chance; (c) Market/Industry structure, where the degree of competition can have a large influence, (d) Other opportunities that face individuals, rather than just the state of their business. 

Internal influences include: (a) Personal character of the entrepreneur, particularly a tendency to be overly optimistic; (b) Lack of managerial capabilities of the entrepreneur, which can lead to poor financial control and/or marketing and/or planning; (c) Limited financial resources, which can lead to cash-flow problems often arising through over-trading. 

The assignment must be presented in the following format: 

§ It must be word-processed in 11 point Arial font and 1.5 - spaced 

§ All pages must be numbered 

§ Margins must be as follows: Top: 1 inch, Bottom: 1 inch (2.5 cm), Left: 1.25 inches, Right: 1.25 inches (3.2 cm) 

§ Assignment should not contain your name(s) 

§ The specified word count refers to the main body of the report and does not include front cover, title page, contents page, executive summary, reference list, bibliography or appendices. The word count does include headings, tables and in-text citations, but not equations or diagrams. 

§ Appendices themselves will not be marked. However, inappropriate use of appendices will be taken into consideration when awarding the final mark. 

§ Words that exceed the maximum allowed will not be marked. If in doubt, you should discuss this with the Module Leader before submission. The main components: (1) Abstract; (2) Problem statement, boundaries; (3) Background; (4) Critical discussion; (5) Conclusion; (6) Personal reflection (as a separate chapter or incorporated into the discussion); (7) References.

Assessment criteria: 

1. A critical approach is adopted, and theoretically rooted arguments are developed and built to address the question (50%). 

2. The extent to which the literature chosen is used to inform and support the subsequent analysis and application of practice (40%). 

3. The paper meets the required standards of presentation and scholarship (10%).

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