Essay: Life Expectancy of SMEs

Sample Essay

Ang (1992) states that SMEs in comparison with larger organisations have a shorter life expectancy and face more problems in transition from one stage of the business to another. SMEs have lower profits due to lower levels of finance and deficiency in managerial resources especially in times of economic distress. The ideas presented in the research are quite relevant today as both small and large companies face tremendous pressure due to economic instability and recession like conditions throughout the world.

In order to remain stable and avoid failure SMEs need to focus on several alternative options available for financing operations and employ personnel with appropriate training and experience in their relevant fields. Although economic downturn affects the availability of finance for SMEs but these enterprises can take advantage of the high unemployment ratio and recruit amply trained and experienced workers for operations at affordable salaries and wages. (Bruderl and Schussler 1990) also identified some disadvantages of SMEs as compared to larger organisations which include poor contracts with creditors, stringent government regulations, unfavourable tax policies and undertrained staff and management.

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