Research has identified factors that contribute to and hinder small business success – for both franchised and independent small businesses.
The research, conducted by Griffith University’s Asia-Pacific Centre for Franchising Excellence, compares surviving and failed small businesses during uncertain economic times in Australia from 2010 to 2012.
Professor Lorelle Frazer, said the research revealed that failed business owners did not attribute economic uncertainty as being any more detrimental to their businesses than did survivors.
Key differences between surviving and failed businesses
“Key differences between surviving and failed businesses tend to be internal factors, such as personality, adaptability and decision-making autonomy, rather than economic conditions alone,” Professor Frazer said.
Failed business owners
“Failed business owners are more likely to be motivated to enter business due to circumstances beyond their control, such as ‘buying themselves a job’ to avoid a negative situation like being unemployed or having no income, rather than based on being proactive towards business success.
“They were also more likely to be in partnership with someone as opposed to sole owners, which may explain why they feel restricted in decision-making and, to a certain extent, less adaptable.”
The research reveals failed business owners tend to be older, have lower levels of formal education, feel they were forced into business ownership and be more likely to have a prevention-focused rather than be proactive towards success.
Surviving business owners
Alternatively, surviving business owners tend to be:
- hold higher levels of formal education,
- have greater levels of autonomy and adaptability,
- lower levels of debt,
- less access to finance, and
- a better work-life balance.
Failure and access to finance
While there was no significant difference in start-up costs between survivors and failed business owners, the percentage of start-up costs that were borrowed was greater by failed businesses.
“This indicates access to finance may not always support business survivability, as it may lead to higher levels of debt, which can be harder to service when times get tough,” Professor Frazer said.
Understanding contractual obligations
“A better understanding of contractual obligations is also an area identified in the research as requiring greater attention from both franchisees and independent business owners.”
Research report details and download
The research was funded through an Australian Research Council Linkage grant with the Department of Industry, Innovation, Climate Change, Science, Research and Tertiary Education and Franchise Council of Australia.