PROBLEMS AND FAILURE OF SMALL BUSINESSES. 3
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- Lack of Skilled Employees: Most employees of small-scale businesses are relations of the owners. These employees are not usually experts or skillful in the business line but because the small business owners cannot afford to pay skilled workers, they make do with these unskilled or semi-skilled employees.
Apart from low wages and salaries paid by small business owners, which may be unattractive to skilled workers, other factors include lack of job security, poor owner-manager behaviour, lack of opportunity for career development and compensatory benefit such as retirement benefits. - Poor Competitive Position: The business environment, especially the industry segment is becoming more competitive. Therefore, to succeed, a business must have good strategies and other very potent tools needed to beat or meet competition.
The owner-manager due to time pressure may not be able to develop effective strategies and it is not equally wise to depend on unskilled employees. In other to compete successfully in the market, a firm must always train its workers, develop appropriate strategies, introduce new products, sponsor marketing activities and pay workers well. All these require finance that a small business owner may not be able to afford.
It is unarguable that some small-scale companies are good innovators. Most of the products available in the market today were developed by small businesses. However, these new product idea or processes are always high-jacked by large-scale companies, which subsequently make it difficult for small businesses to profit from their innovations. In cases where the small scale innovator takes up the patent, the larger business skirt such patent thus destroying the continued existence of the small scale niche. - Narrow Product Line: Most small scale businesses, especially those in the manufacturing industry, rely too much on a single product or too few products. There are dangers associated with over-reliance on a single product. For example, changes in weather or consumers income can have adverse effects on a firm's sales. On the other hand, change in government policy that results in non-availability of a company's major raw material and the entrance of a better-equipped competitor can bring down the sales of a company that relies on a single product.
- Management Ineptitude: Lack of management skills and abilities on the part of the owner is a major problem and cause of failure of small businesses. These problems usually reflect in poor planning, adoption of bad management styles such as autocratic style, poor decision-making, wrong investment choice, abuse of freedom or independence and general inability to adopt scientific and modern business techniques.
To be continued.
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