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Planning for survival and growth of a small business / by Ware T. Beall, Jr.

by Beall, Ware T.

Small business -- Growth

Small business -- Management

Business planning

v, 94 leaves : ill. ; 28 cm.

Introduction -- Causes of business failure and success -- Welding supply distributors scenario -- Planning -- Summary -- Conclusions -- Appendix A) Management traps -- B) Evolution of an organization -- C) Financial reality test -- D) Product-market concept -- E) Glossary

The financial health and success of small businesses are of paramount importance to the economic health of the United States. Small businesses: make up 97 percent of all businesses in the U.S., employ 57 percent of the workforce, provide 45 percent of the Gross National Product, have created 67 percent of the new jobs in the U.S. over the last ten years. The Dun and Bradstreet failure rate (the ratio of failures per 10,000 companies, was about 89 for 1982; by far the greatest since the failure ratio hit 100 in 1933, in the depths of the Great Depression.

The majority of these failures have been small scale enterprises with sales of less than $100,000. They traditionally suffer from inadequate capital, inexperienced management, and pressure from larger, more established competitors. Slow growth and high interest rates have destroyed the margin for error these firms have enjoyed during inflationary times, leaving only the best managed firms.

In 1982 the small business failures have been joined by large well capitalized corporations such as Braniff Airways, Wickes, Saxon Industries, and Revere Copper and Brass; not to mention those on the ropes such as Allis Chalmers, International Harvester, and Harnischfeger. The recession is performing the weeding-out function leaving leaner and more efficient firms. Unfortunately, we’ve lost established companies to low demand, high debt, and a restructuring of the market place, but as long as there remains a market for the product or service the bankrupt firm was providing, more efficient competitors or new business will pick up the slack.

The dynamic effects of the self-correcting forces are profoundly demonstrated by the remarkable number of new companies being formed. For every business that failed in 1982, 20 new ones were started. That is over 500,000 new firms in 1982, approaching the 1981 record for business starts. As these businesses survive and grow, they will more than offset the jobs that were eliminated by failures.

These new firms must survive and grow as well as those small businesses who have made it through this recession. But why do businesses fail and what can be done to improve the success ration?

We will look at some of the causes for failure of a small business as well as the factors of success. We will then develop a scenario of the Welding Supply Distributor Company that will enable us to see where planning is needed as the firm grows. Planning strategies will then be discussed to show how the owner-manager can anticipate problems and compensate for them while capitalizing on the success factors.

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