The internal and external environment for small business growth in Pietermaritzburg.
Pillay, Morgantheran Kumaruguru.
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This study investigated the internal and external constraints facing small business owners in the Pietermaritzburg (PMB) region. An attempt was further made to determine: whether the internal constraints or external factors constitute a greater burden on growth; whether policy focus should concentrate more on the internal constraints or external factors and determine the association between average growth (in terms of the number of employees) and the educational level and training of the owner/ manager, gender, ethnicity, business activity, legal status of the business and sources of start-up capital. Knowledge of the relative role of personal and environmental factors of this study in bringing about growth and expansion provides directions for government policy on Small and Medium Enterprise (SME) development. By means of factor analysis the numerous internal and external environmental variables affecting business growth in PMB were reduced to a set of three factors, classified as management, financial and external. Collectively they accounted for 59.21% of the total variance of the model. The internal factors (management and finance) accounted for 48.95% of variance and it was concluded that internal factors are more burdensome to growth than external factors. As a result government support should focus more on the internal constraints facing the small business sector. Further, multiple regression analysis was used to arrive at a parsimonious model that 'best' explained the regression model which accounted for 45.4% of variance with average growth. Average growth, in terms of the number of employees, was found to be a function of, the level of education of the owner / manager, legal status of the business, source of start-up capital, exposure to training and business support. Internal factors such as obtaining finance, cash flow, recruiting and retaining staff, shortage of managerial skills/ business expertise and lack of financial understanding prevent growth of the business. External factors such as the economy, taxation, regulation and laws, technology, competition, lack of business support and crime were found to inhibit the growth of the business. A significant difference was found to exist between average growth and gender, legal status, business activity, source of start-up capital and the educational level and training of the entrepreneur/owner. These results also have implications for the management of the SME's as well as business networks such as the Chamber of Commerce and financial institutions.