UNIVERSITY OF ZIMBABWE
TITLE: A STUDY TO EXPLORE THE POSSIBLE FACTORS LEADING TO FAILURE OF SMALL TO MEDIUM BUSINESSES
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TAPIWANASHE B MHERE
PROJECT PROPOSAL SUBMITTED PARTIAL FULFILLMENT OF THE REQUIREMENTS OF ACCOUNTANTS DEPARTMENT.
FACULTY OF COMMERCE
In this study we are going to explore possible causes leading to failure of Small to Medium businesses. In today’s economic environment Small to Medium enterprises is viewed as a driving for the growth. Small firms are defined on the grounds of measure such as the size of the business, amount of turnover and the number of employees, other various basis depending on the context and relative industry have been used. However it is imperative to note that it is rather difficult to define what really a small business is as this has led to rather conflicting views (ACCA2010). These small to medium businesses consist a larger proportion of the total employment in most economies in the world, especially in developing countries. In Zimbabwe, small to medium enterprise faced many challenges in 2008 because of the rise in inflation which caused to the fall of these businesses. Without access to capital these SME’s may collapse.
According to (Rostow, 1960) promotion of infant industries is one of the major drivers behind the success of industrialization in Europe. . Thus with this notion in mind the giant economies which we are familiar with in today’s business environment have evolved over the years aiding small firms and nurturing those which have just been established. SME’s find it difficult to obtain bank loans as compared to larger firms, instead, all their funds are obtained from internal funds, or borrow cash from family and friends so as to run their business effectively and efficiently. Small firms have less collateral security and hence they find it difficult to obtain formal credit from financial institution and other money lenders. One of the major causes of corporate failure is lack of sufficient funds. Other internal causes include lack of managerial experience, lack of functional skills and poor staff training. More over there are some external factors which include competition, unfavorable government policies and high cost of production.