A success versus failure prediction model for small businesses in Singapore

Abstract

Purpose

The purpose of this paper is to examine the potential success and failure of small‐ and medium‐sized enterprises (SMEs).

Design/methodology/approach

An exploratory business success versus failure (S/F) prediction model is introduced, modeled after the Lussier prediction model, using data from Singapore. Using logistic regression analysis, it is found that the Lussier model (p=0.057) and the exploratory model (p=0.047) are significant predictors of business success and failure.

Findings

The Lussier model accurately predicted 85.6 percent of the surveyed firms and explained 25 percent of the variance of contributing factors to S/F, and the exploratory model explained 86.3 and 38 percent of the same, respectively. SMEs regard the top four most important factors contributing to their business S/F as: employment, training, and the retainment of high‐quality staff members; prevalence of good products, services, and optimum timing in introducing these in the marketplace; excellent relationships with customers and availability of top managers with good leadership qualities.

Research limitations/implications

It is surprising that while pursuing their respective business activities, the SMEs surveyed in this study regarded government policy and the availability of business finance, amongst other factors, of lesser importance compared to the above‐mentioned four broad variables.

Originality/value

This paper establishes benchmarks that could be helpful to decision makers for improving future business‐related policy formulation and research. Business leaders could pursue their goal of ensuring business successes with better personnel management and leadership training by, for example, taking more business management and leadership courses and personal development. Government public policy makers and others could utilize such a model to assess a firm's potential for success so that society could benefit via the allocation of limited resources toward higher potential firms.

Citation

Siow Song Teng, H., Singh Bhatia, G. and Anwar, S. (2011), "A success versus failure prediction model for small businesses in Singapore", American Journal of Business, Vol. 26 No. 1, pp. 50-64. https://doi.org/10.1108/19355181111124106