30/01/2007 - 22:00

Search for solutions to survival for SMEs

30/01/2007 - 22:00

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Bassendean businessman John Mitchell wants to unlock some of the secrets of small business, especially the reasons why so many fail.

Search for solutions to survival for SMEs

Bassendean businessman John Mitchell wants to unlock some of the secrets of small business, especially the reasons why so many fail.

With the current resources boom potentially propping up small-to-medium enterprises that could be doomed in a tougher environment, Mr Mitchell is embarking on a major study of Western Australia’s small business scene.

He hopes his planned thesis at Curtin University will have a lasting impact in the sector, providing strategies for SMEs to survive when the boom ends.

A Doctorate of Business Administration scholarship winner, Mr Mitchell’s thesis will provide a formal assessment of SMEs in the state, which may then be used to create a framework for small business owners.

“What I’m hoping is the end result will be a set of business performance criteria for SMEs…so business owners can say, ‘if I want to grow my business, I must have these key performance drivers in place’,” said Mr Mitchell, the general manager of food service business Total Catering Solutions.

He hopes a publication or a business course will result from his study.

Mr Mitchell will interview owners of small businesses with a turnover of between $3 million and $10 million.

Preliminary research shows one third of SMEs shut down within five years of their establishment. More than half close in the first 10 years.

“The further a business goes, the more chance it has of failing than succeeding,” he said.

“What’s really poignant now is WA is in a resources boom. For a lot of businesses, especially sub-contractors, it’s serendipitous; they’ve grown by default.

“When this cycle of boom ends, are they going to know how to continue to grow their business?”

Mr Mitchell said the main reasons small businesses failed were a lack of expertise in management, a failure to adopt growth strategies, and a reluctance to employ experienced managerial personnel.

“I find a lot of business owners are somewhat short-sighted and do not want to relinquish control. They won’t invest in professional management to make the business successful into the future,” he said.

“One minute they’re a $3 million business, the next they’re a $10 million business. They don’t have the expertise to drive the business and it hinders their further growth, because they don’t know how they got where they are.”

Mr Mitchell said there was a shortage of relevant information on the performance of SMEs.

“All the current research is quite outdated; research has never been done specifically on WA companies,” he said.

“It’s pretty much recognised around WA that WA business is very incestuous and we operate very differently to those in Sydney, Melbourne or Brisbane.”

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