Factors Leading to Poor Performance and Subsequent Closure of Small Businesses in Kenya: The Case of Thika Sub County

Abstract

A business is an organization or an entire market sector such as agriculture whose main purpose is profit generation. Small and Micro Enterprises (SMEs) that employs up to 50 staffs form the backbone of Kenya's economy, contributing a big percentage of the Gross Domestic Product. Despite their significance, small businesses have continued to face challenges such as inability to secure credit and meet clients' needs in terms of product quality and quantity among others. However, there is inadequate data on the factors leading to dismal performance and subsequent collapse of the small businesses as opposed to large scale enterprises hence the need for this study. The study was undertaken in Thika Sub-County of Kenya. It has assumed active participation of the sampled respondents as well as a favorable socioeconomic environment for its success. A descriptive research design has been used in the study where data from 42 sampled respondents was collected through questionnaires and analyzed using both qualitative and quantitative techniques. Data has been presented and analyzed using tables and findings discussed leading to the conclusion that lack of guarantors and difficult conditions by financial institutions as well as failure to utilize external advice are some of the key factors leading to poor performance of small businesses. The study has recommended adoption of computerized financial management systems by SMEs to improve on their profitability and sustainability.