Management and Leadership Skills that Affect Small Business Survival: A Resource Guide for Small Businesses Everywhere

By Jamey M. Long

Have you ever wondered why many of the over 28 million small businesses in operation in the United States do not survive past the first five years? Is it the economy? The stock market? Or is it something else? Two years of research by Jamey Long on factors affecting small business survival revealed a direct relationship linking management and leadership skills. Management and Leadership Skills That Affect Small Business Survival presents the research leading to this discovery that focuses solely on small businesses in the United States and teaches them how to improve management and leadership skills so that they can survive past the historical five-year failure mark.

• Language: English
• Publisher: Anthem Press
• Release date: Apr 30, 2019
• ISBN: 9781783089512

Book preview

Management and Leadership Skills That Affect Small Business Survival

Management and Leadership Skills That Affect Small Business Survival

A Resource Guide for Small Businesses Everywhere

Jamey M. Long

Anthem Press

An imprint of Wimbledon Publishing Company

www.anthempress.com

This edition first published in UK and USA 2019

by ANTHEM PRESS

75–76 Blackfriars Road, London SE1 8HA, UK

or PO Box 9779, London SW19 7ZG, UK

and

244 Madison Ave #116, New York, NY 10016, USA

© Jamey M. Long 2019

The author asserts the moral right to be identified as the author of this work.

All rights reserved. Without limiting the rights under copyright reserved above, no part of this publication may be reproduced, stored or introduced into a retrieval system, or transmitted, in any form or by any means (electronic, mechanical, photocopying, recording or otherwise), without the prior written permission of both the copyright owner and the above publisher of this book.

British Library Cataloguing-in-Publication Data

A catalogue record for this book is available from the British Library.

Library of Congress Cataloging-in-Publication Data

Names: Long, Jamey M., author.

Title: Management and leadership skills that affect small business survival : a resource guide for small businesses everywhere / Jamey M. Long.

Description: New York, NY: Anthem Press, 2019.

Identifiers: LCCN 2019012571 | ISBN 9781783089499 (hardback)

Subjects: LCSH: Small business – Management. | Leadership. | BISAC: BUSINESS & ECONOMICS / Management. | BUSINESS & ECONOMICS / Leadership. | BUSINESS & ECONOMICS / General.

Classification: LCC HD62.7.L656 2019 | DDC 658.02/2–dc23

LC record available at https://lccn.loc.gov/2019012571

ISBN-13: 978-1-78308-949-9 (Hbk)

ISBN-10: 1-78308-949-0 (Hbk)

This title is also available as an e-book.

Contents

List of Tables

Preface

Part 1 Research study: Management and Leadership Skills that Affect Small Business Survival

1Introduction to the Study

2Literature Review

3Methodology

4Results

5Discussion

Part 2 The CMLRG: The complete management and leadership resource guide for the small business owner

6The Small Business Marketplace

7The Complete Management and Leadership Resource Guide (CMLRG)

References

Index

Tables

4.1Demographics of participants

4.2Themes: Relationship between management and leadership skills

4.3Themes: Management problems in small businesses

4.4Themes: Leadership problems that lead to failure

4.5Themes: Need for management and leadership skills

Preface

Have you ever wondered why with over 28 million small businesses in operation in the United States many do not survive past the first five years? As a fellow small business owner (and professor of business administration) trying to compete in the global economy, I became interested in understanding the causes why many small businesses failed.

The main reason was to avoid the same mistakes made by others before me. This question consumed me to the point that I decided to go back to school and earn a doctorate degree in business to hopefully understand the answer. Through my studies, I began to suspect that the main cause of failure for small businesses was the lack of understanding between the roles of management and leadership. I soon became very frustrated when I could not find research studies that showed the direct link between the necessary skills needed for small business survival.

With little information or resources to rely on, I knew that if I wanted the answers I would have to conduct my own research study to gain the necessary insight into this ongoing problem that has plagued over 50 percent of today’s small business workforce. For two years, I personally studied small businesses in the global economy. After completing a comprehensive study, I was able to finally document actual information that proved that management and leadership skills had a direct effect of small business survival. Once I understood the effects that management and leadership skills had on small businesses, I wanted to apply my research to helping small business owners improve their business.

I thought about the struggles and how I could not find any books or resources that provided a one-stop shop with detailed information on how to succeed in small business management and leadership. All I had available was a lot of business books and models that were created for large corporations; I had to modify bits and pieces from several resources to hopefully fit my needs. This process was very time-consuming and did not give me a good sense of how everything fit together to help me succeed. In fact, everything I found I experienced through starting my own small business, and I wanted to create a guide that provided a quick resource for all small businesses.

Since there are many different types of small businesses in diverse markets, it is easy to understand why there were no specific resources. A resource that looked at the primary basic functions and demonstrated the causal links between management and leadership skills had to be created for the trade sector market of small businesses. With the research now complete, I was able to create The Complete Management and Leadership Resource Guide for the Small Business Owner. This guide comprises 12 modules with resources that will help small businesses understand the management and leadership skills necessary for succeeding in all of the business functions that include Business Law, Economics, Entrepreneurship, Ethics, Accounting and Finance, Human Resource Management, Marketing, Organizational Behavior, Small Business Planning and Organization and Statistics for Small Business Owners.

To help the small business owner with many challenges and time constraints, this book is divided into two parts. Part 1 provides the history of the effects of management and leadership skills in small business with the research study Management and Leadership Skills That Affect Small Business Survival. Part 2 is The Complete Management and Leadership Resource Guide for the Small Business Owner. The purpose of this section is to give an easy understanding of the integration of management and leadership skills required in each area of business that are required for a small business to surpass the traditional five-year failure period. This resource has provided me valuable insights into operating my own business and it is my belief that it will bring the reader the same results.

Part 1

Research Study

Management and Leadership Skills that Affect Small Business Survival

Introduction

Barriers to market entry for small businesses include capital requirements, competitive advantage of incumbent firms, the business environment and the educational background of the owners. Once small businesses have entered the market, a number of factors might increase the risk of failure: active reorganization actions, division of operating cash flow by current liabilities, cash flow coverage of interest, operating cash flow margin, operating cash flow return on total assets and earning quality. The purpose of this qualitative interpretative phenomenological analysis (IPA) was to identify what areas of leadership and management had the most influence on small business failure.

The theoretical foundation included the Purpose (the organization’s mission, vision, goals and objectives), Principles (guiding philosophies, assumptions or attitudes about the organization), Processes (organizational structures, systems and procedures), People (individual employees and team) and Performance (the metrics, measurements and expected results that indicate the status of the organization, which were used as criteria for decision making).

Although researchers have found that effective management and leadership were essential for small business success, research terms have only defined these in general terms. This study’s findings contribute to the literature in this field by providing a greater level of detail regarding the meanings of effective versus ineffective leadership and management in small businesses. Findings indicated that essential management and leadership skills included communication, interpersonal skills and goal setting. The findings were consistent with the 5Ps strategic direction and management model. Small business leaders and managers may use this study’s findings to understand effective versus ineffective practices in beginning a new business.

1

Introduction to the Study

An estimated 28,443,856 small businesses in the United States employ about 56.1 million of the nation’s private workforce (Office of Advocacy, 2015). The combined total revenue of small businesses accounts for more than 50 percent of the gross domestic product (GDP) of the United States (Nickels, McHugh, & McHugh, 2015). The three industries with the highest small business employment include health care and social assistance, accommodation and food services, and retail trade. The three most common industries for small employer firms across the United States include professional, scientific and technical services; other services (except public administration); and retail trade (Office of Advocacy, 2015).

While small businesses are responsible for producing the majority of the GDP, many small businesses do not survive past the first years of operation. For example, 40 percent of new business ventures fail in their first year, 60 percent in their second year and 90 percent in their first 10 years of existence (Radipere & Van Scheers, 2014). In the retail trade industry, approximately 17 percent of new business ventures fail within their first year, 34 percent in their first three years and 43 percent in their first five years of existence (U.S. Bureau of Labor Statistics, 2015).

The results of this study could help identify management and leadership skills that contribute to the success and failure of small businesses. This information could help small business owners develop a winning strategy that combines the roles of management and leadership. The researcher explored the perspectives and experiences of current and former small business owners regarding the leadership and management skills that affect the survival of small business ventures. Participants in this study included individuals whose small businesses have failed, as well as individuals whose companies have remained in business for at least 10 years. Perspectives of individuals whose businesses span a wide timeline allowed for better insight and comparison of company elements.

The researcher discusses the following details to illuminate the research topic further: (a) background of the study, (b) problem statement, (c) purpose of the study, (d) research questions, (e) advancement of scientific knowledge, (f) significance of the study, (g) rationale for methodology, (h) nature of the research design for the study, (i) definition of terms and (j) assumptions, limitations and delimitations. The chapter ends with a summary and an overview of the remainder of the proposal.

Background of the study

Barriers to market entry for small businesses include capital requirements, competitive advantage of incumbent firms, the business environment and the educational background of the owners (Karakaya & Parayitam, 2013; Lofstrom, Bates, & Parker, 2014). Once small businesses have entered the market, a number of factors may increase the risk of failure: active reorganization actions, division of operating cash flow by current liabilities, cash flow coverage of interest, operating cash flow margin, operating cash flow return on total assets and earning quality (Bhandari & Iyer, 2013; Lussier & Corman, 2015). The rate of continuation of small businesses after the first 5 years is under 25 percent (Nickels et al., 2015). Often, one could attribute business failures to a lack of managerial experience and leadership skills (Nummela, Saarenketo, & Loane, 2016). Researchers often interconnect these two qualities since leadership represents the primary cornerstone of organization and management (Hatten, 2015; Team Technology, 2016). Business failure, considered in this study, refers to the cessation of a business venture because of an inability to meet the minimum threshold for economic viability (Ucbasaran, Shepherd, Lockett, & Lyon, 2013). In other words, this researcher considered businesses that have shut down due to bankruptcy or liquidation (Ucbasaran et al., 2013) as failed businesses.

Many costs are associated with small business failure. These include financial, social and psychological costs of failure (Ucbasaran et al., 2013), as well as social and personal stigmas (Simmons, Wiklund, & Levie, 2014). Moreover, researchers found entrepreneurs who attributed previous business failure to an internal cause, such as low ability, as less successful in subsequent business start-ups (Sserwanga & Rooks, 2014). Low ability applies to lack of financial resources, predicting the economic environment and not having the necessary time and resources to act as both manager and leader within their business operation. Entrepreneurs can better learn from previous failures when they have a cognitive toolset that allows them to analyze their previous shortcomings (Mueller & Shepherd, 2014). Specifically, since one of the most common reasons behind business failures is insufficient experience, current and future small business owners may gain ample insight about how certain leadership and management skills affect small business survival and use such knowledge in managing their own enterprises.

The identified gap in the literature included the fact that, even though researchers have well documented that small businesses failed frequently due to the absence of managerial and leadership skills, researchers still do not know the specifics of these skills and ways in which these affect the survival of small businesses in varying industries. Several researchers have identified the need to conduct research exploring what factors could help distinguish success from failure in small businesses in the areas of management and leadership (Agbim, 2013; Ates, Garengo, Cocca, & Bititci, 2013; Renko, El Tarabishy, Carsrud, & Brännback, 2015).

Problem statement

Fifty percent of new small business ventures fail in the first year, 60 percent fail in their second year and 90 percent in their first 10 years of existence (Radipere & Van Scheers, 2014; U.S. Bureau of Labor Statistics, 2012). Many reasons exist behind the failure of small businesses, including

• gender disparities (Loscocco & Bird, 2012 ; Wu & Chua, 2012 );

• a lack of crisis management experience, marketing issues, lack of financial and human resource management skills (Arasti, Zandi, & Talebi, 2012 );

• a dearth of managerial experience and business competence (Nummela et al., 2016 );

• insufficient human capital (Rauch & Rijsdijk, 2013 );

• the absence of inventory, marketing and financial planning activities (Gaskill, Van Auken, & Kim, 1994 ; Jackson, Vozikis, & Babakus, 2015 ); and

• a lack of managerial experience and leadership skills (Nummela et al., 2016 ).

The problem was the frequent failure of small businesses in the marketplace. The consequences of small business failure included negative social and economic stigmas (Simmons et al., 2014), cognitive and motivational consequences (Sserwanga & Rooks, 2014) and financial and psychological costs (Ucbasaran et al., 2013).

The theoretical framework for this study derived from the 5Ps strategic direction and management model, developed by Pryor, Toombs, Anderson, and White (2010), which included the following 5Ps:

1. Purpose (the organization’s mission, vision, goals and objectives)

2. Principles (guiding philosophies, assumptions or attitudes about the organization)

3. Processes (organizational structures, systems and procedures)

4. People (individual employees and team)

5. Performance (the metrics, measurements and expected results that indicate the status of the organization, which were used as criteria for decision making)

The 5Ps model was an appropriate framework, as researchers used these criteria to determine what areas were most problematic for small businesses and their owners. Researchers have called for studies to determine what factors could distinguish success from failure in small businesses in the areas of management and leadership (Agbim, 2013; Ates et al., 2013; Renko et al., 2015). The goal of this study was to identify management and leadership skills that affect the survival of new business ventures from the perspectives of current and former small business owners.

Purpose of the study

The purpose of this qualitative interpretative phenomenological analysis (IPA) was to identify the areas of leadership and management that have the most influence on small business failure. The classification of a firm as a small business depends on the number of employees, the annual receipts earned by the firm and the sector or industry to which it belongs (U.S. Small Business Administration [SBA], 2016). In the wholesale trade sector, small businesses included firms that have 100 to 500 employees, while in the retail trade sector, the annual receipts of small businesses may not exceed $5.0 to $21.0 million (U.S. SBA, 2016).

The researcher used criterion and snowball sampling to obtain a diverse and inclusive sample of businesses and business owners from the local community. Criterion sampling involves selecting participants according to a predetermined set of criteria (Orotin, Quisenbery, & Sun, 2014). Choosing participants through criterion sampling is common in phenomenological studies as it shows the integrity of the study, such that participants have adequate experience related to the phenomenon of interest (Orotin et al., 2014). Additional participants were recruited with the use of snowball sampling through referrals of individuals in the social networks of existing participants (Pattison, Robins, Snijders, & Wang, 2013). The researcher aimed to understand the aspects of management and leadership skills that were vital to the success of a small business, whether absent or present.

Research questions

Based on the identified problem, this researcher focused on identifying perceived areas of leadership and management that affected the success and failure of small businesses. The research questions included the following:

R1. How do small business owners perceive the relationship between management and leadership skills and small business success or failure?

R2. What do small business owners identify as management problems that lead to success or failure?

R3. What do small business owners identify as leadership problems that lead to failure?

R4. How do small business owners perceive the need for management and leadership skills to succeed in the small business arena?

Significance of the study

The gap in the literature included the identification of the specific leadership and management skills contributing to the survival of small businesses (Agbim, 2013; Ates et al., 2013; Renko et al., 2015). This study addressed the problem of the failure of small businesses by identifying the management and leadership skills that could help sustain and support small businesses. Hence, the results of this study might have significance for previous, current and future small business owners because they could use the knowledge, emerging from this study, to inform their business decisions, especially concerning managerial tactics and leadership skills. Such knowledge is critical, especially given the high rates of business failure in the United States during the economic recession of 2008–2010 (Bhandari & Iyer, 2013; Radipere & Van Scheers, 2014). The results of the study might provide a more comprehensive understanding of the specific leadership and management skills that remain critical to small businesses, which could contribute to either a business succeeding or failing.

By pinpointing and recognizing the specific set of variables within leadership and management skills that aid in the success of small businesses, business owners would have the opportunity to adopt those variables. This tactic might provide greater economic growth for both the owner and the economy as a whole, and it could possibly reduce the barriers for entry into the small business arena by other would-be entrepreneurs. Moreover, the results of this study could add to the resources for small business owners who have not had a formal education. The results of this study could also help in developing and promoting innovative resources for small business owners and

Reviews for Management and Leadership Skills that Affect Small Business Survival

[omar siddiqui · Rating: 5 out of 5 stars]

Management and Leadership Skills that Affect Small Business Survival: A Resource Guide for Small Businesses Everywhere by Dr. Jamey Long is a great resource for anyone with a desire to start their own small business. The book contains helpful tips for entrepreneurs on how to run their business. It may be used as a tool to avoid certain failures the new businesses create when they don’t contain the right leadership and/or capital. Most importantly, the book is based on research conducted by Dr. Long and a wide one at it. His research is brilliantly divided into two sections; Part I focuses on the research specific to failures in businesses and Part II serves as a resource guide for management and leadership. The 5P’s: Purpose, Principles, Processes, People, and Performance are important topics to remember throughout this read.

The methodologies and procedures in part one focus on the raw data. It includes research questions and possible themes to explain the questions and how to overcome some issues. This part is crucial in understanding the major issues that business owners have such as lack of communication, which is surprising none the less. From the beginning, Dr. Long highlights that most small and medium businesses fail within the first years. The tables and the answers to questions in this first part are organized and concise making it easy for anyone to come back and find credible information. This part is practically a handbook on effective versus ineffective practices to business owners. Although the book states that only 10 participants provided responses to the research questions and therefore lacks diversity, it still serves as an educational guide to entrepreneurs.

Part two of his book is practically a resource guide for active business owners. It contains a section titled the “winning strategy” which actually lists strategies that business owners must practice to succeed. Two important topics in this section are leadership and management; two vital parts in successful businesses. This section serves as a guide into the competitive global economy. Dr. Long provides informative sections on numerous business aspects. These aspects include contracts, economics, accounting, marketing, human resources...., etc. A big thing to take away is that small businesses grow when they produce a certain amount of goods and services and this will evidently uphold the changing consumer demand.

In conclusion, the book is not just useful to those wanting to start their own business or currently running one, but it’s also useful to anyone wanting to educate themselves on small business strategies. The book lays out major causes such as management and leadership which affect small businesses. Because most businesses fail within the first few years, this book serves as a guide to avoid mistakes. Dr. Jamey Long researched thoroughly and effectively divided up information which makes it easy to follow. Something to ponder on after this read is that If business owners take the time and invest in learning practices like the ones published in this book, the failure rate of these businesses can be reduced significantly.

[phamdoanh · Rating: 5 out of 5 stars]

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