Question

Explain TWO (2) ways a small business can increase its success and TWO (2) possible causes of failure.

Answer 1

Small business have an advantage as well as are more prone to failures. The main objective is to maintain balance of risks and meet customers demand:

Possible causes of small business success are:

1) Adapt to the taste of local consumers: Any small business has a limited geographical reach which means more importance is given to the local consumers and to their tastes. Due to great deal of   knowledge about the cultures and preferences it becomes much easier to adapt to the changes and provide better products to its customers.

2) More innovative: Small businesses are tends to be more innovative in comparison to large businesses because large businesses incur huge costs which needs to recovered and selling an already successful product or service is much safer. For small businesses trying out a new item will not be so much expensive as the scale of business is already small, so there will be no huge expenses on launching the product and on setting up of manufacturing centers or service centers.

The most possible causes of small business failure are:

1) Financial problems: Most of the small businesses have strictly limited funds. Lack of working capital can result in delay in operations and loss of customers. In some situations, the owners of businesses in order to attract customers are unable to determine the correct basic price which will provide enough profit to survive and grow. Financial loans are not available so easily adding more to the hardships of the new business.

2) Ineffective planning: Lack of proper planning about the current and future of the business in most cases leads to business failures. There many factors that can negatively impact the businesses such as the opportunities and threats in the market. Cash flow, budgets, marketing analysis and their position in the market. Without proper plans prepared in advance, businesses are unable to stay relevant and adapt to the changes of the market.