Performance Measurement, Difficulties in Measuring Small Business Performance
Performance Measurement, Difficulties in Measuring Small Business Performance
Trying to measure performance, in general, is a difficult task for scholars; the difficulties intensify when the subject is the measurement of small business performance. In this article, which is the third in the series, an overview of the major obstacles for measuring small business performance is presented.
Time is a substantial factor that needs to be taken into consideration when trying to measure performance in small business, because measuring the profitability of small businesses in their first years of operation can be misleading. Mcdougall, Robinson and denisi (1992) state, that small businesses are usually not expected to generate any profit in their early years of operation. Biggadike (1979) define a milestone of eight years in operation, in average, before new venture is expecting to generate profits.
Growth rate is not equal in all businesses; moreover it varies substantially between businesses and across industries. Cooper (1979) has related to the potential influence of rapid growth, and noted that operational losses or poor profits in small businesses with growth orientation can’t be used as an indicator for management failure, if the cause for the result is heavy investments in new markets or products. If at different industries we’re expecting different growth rate, then as Miller and Tolouse (1986) states, the industry in which the business is operating in is affecting the level of
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