Look at the internal factors and your Strategic plan and marketing plan

I would add, more to Mr. Al-Haddad's list

Internal and external stakeholders, Voice of the customers (VoC). closely watching and monitoring their interests and concerns, & Managing Risks

The business has to create value for its stakeholders otherwise it will never survive. A company can have all the cash it needs and all the talent it needs but fail miserably if it fails to get the value strategy correct.

Thanks Gregory for your insightful answer,

I agree with you that there should be a value creation strategy to make the small business grow. However, limitation of internal resources is the major constraint faced by small business starters. Without addressing constraints, I suggest that optimizing value creation strategy may have little use. Moreover, profit maximization is not possible in entrepreneurship since entrepreneur never knows the market response for future value of goods and services that he/she intended to produce.

Upananda

I agree with Prof Shafig for for what he stated regarding the major internal factors that contribute to make small business big. I would add that increasing the stakeholders value is a very essential factor in this connection.

Internally, capabilities and competencies are the ones which matters. These are drivers of all the other resources available. Smart employees will always be innovative and as a result growth will be experienced in the business.

Communication is also critical as the chosen strategy will not be well implemented unless it is understood and agreed upon by all the stakeholders. Failure to implement a strategy as planned is disastrous to the business as it means loss of time, money and other resources.

Hi Upananda,

The classical paper by Cabral & Mata, 2003, On the Evolution of the Firm Size Distribution: Facts and Theory, American Economic Review, focus on financial constrains.

Check that paper and the many ones that have cited it and you will get a good look of the literature on your topic.

May I make the following recommendations:

(1) The will to grow must be translated into a realistic plan with a set of SMART (specific, measurable, attainable, realistic and time-bound) short term objectives,

(2) The owner/manager must have the capability to focus on the big picture rather than keeping his/her traditional micro-management focus,

(3) The business must and should gradually develop organisational capabilities that will facilitate the growth process

(4) The owner/manager must account for the additional skills, competencies and resources required to scale the business operations (further recruitments)

(5) My final suggestion would be to encourage the owner/manager not to downplay the importance of the tacit knowledge stock of his business. In other words, to value his/her long terms employees and train them to acquire additional competencies.

IT IS IMPORTANT TO REALISE THAT THESE INTERNAL FACTORS SHOULD NOT BE CONSIDERED IN ISOLATION, THEY ARE INTERACTIONAL. Therefore, understanding how they interact may facilitate a better understanding of the value-creation mechanisms TO PUT IN PLACE.

Either "push", through investments from major stakeholders and recognizing market opportunities or "pull", by demand (i.e. Meeting a market need). But usually the market makes a small business get big.

Establishing a mindset and culture that makes everybody focusing and markets and clients is the a key ingredient, besides behaviors like team work, innovation, execution and integrity.

The two most important internal factors to start with:1.Develop&utilise firm,s internal resources and capabilities(seeJ.B. Barney 1991 &Edith Penrose 1959

2.Develop a market driven strategy to help your firm growth. School Of Buziness

Prof.Zuhair Al-Obaidi,Aalto University School Of Business

Thanks Zuhair,

I agree with you.

However, don't you think rather than merely utilizing internal resources in which capabilities are included, efficiency of using those internal resources (Kolvaried and Shane, 200?)

Managerial expertise is very essential for growth of small firms.Every business organization requires proper and better management to really grow. Proper co-ordination of activities and various units of the small firm is also an internal factor that can turn a small firm into a big one. Lack of managerial ability on the part of managers and lack of proper co-ordination of activities have really contributed to folding up of many small organizations.

There's some strong academic work going back a few years that highlights some of the core challenges of growth, and perhaps the most helpful is Penrose, E. T. (1959). "The theory of the growth of the firm". Oxford (UK), Blackwell, accessible via Google books at http://bit.ly/1jjkvRk. Also, with more of a focus on the growth of technology firms, the work of Elizabeth Garnsey is worth reading. See for example Garnsey, E. W. (1998). "A theory of the early growth of the firm." Industrial and Corporate Change 7(3): 523-556. and Garnsey, E. and P. Heffernan (2003). "Growth setbacks in new firms." Centre for Technology Management Working Paper Series 2003/1 available at http://www.ifm.eng.cam.ac.uk/uploads/Research/CTM/Resources/03_01_garnsey_heffernan.pdf

Innovation is the key factor, you can have a look to the paper attached

Sorry, here the paper

Will recommend the following:

1.Knowledge and constant innovation

2.Acess to market that generate positive cash flow

3.Legislation that protect SMEs

4.Access to financial resources at concessionary rates

5.Above integrity of owners.

I do not want to sound disrespectful so please do not misunderstand my point. There are a great deal of articles looking in to business success and discussing it from an academic perspective. However before I entered academia in 2007 I spent 30 years running, owning and developing profitable businesses.

Everything in the above comments is true it is however not necessarily accurate.

What makes a business successful and worthy of growing in to a big business is really only three things:

1-Does the business have a value strategy that resonates with the marketplace?

2-Can the leadership build a process that continually enhances value for the marketplace?

3-And is the business managed according to a sound management principles?

Great ideas fail without great leadership. Great Leadership fails without a good value strategy. And No business is sustainable if it is financially irresponsible. And a great idea at the wrong time may not work simply because the market wasn't ready yet.

Conversely, A mediocre idea, with no money can be driven to the top by exceptional leadership. And a spectacular strategy can be destroyed by bad leadership.

Many people see the success of the IPAD and rightly credit Steve Jobs with bringing a game changing product to market. But many people forget that Jobs tried to bring this product to market twice, once under the Apple Newton concept and once under Next computing and both product lines failed miserably. The reason that the IPAD came to fruition is because Jobs learned from his failures and persevered until he got it right. Strong leadership overcomes the negativity to get the job done when no-one else thinks it can be done.

In short, you need a Value strategy that resonates with the marketplace, (right product right time) That is the market wants the product. Once the sales have begun the product must continually improve and add value to the market. (Stay ahead of the competition) And you must use good management principles to keep sales expenses and ROI in line to not grow too slowly or too fast.( Sound use of capital)

Thanks Gregory for illuminating me with your vast experience in business.

However, I am not that confidence about the value strategy that resonate with the market place. By definition, small business has no market power (Bolton Committee, 1971?) .

M. Vivarelli,

Dear Sir,

Thanks for providing me with an excellent article but free of charge. If I were asked pay, I am willing to pay for the article. As a respect for your generosity, I take off my hat.

Your article has covered majority of essential concepts to answer my question except social capital which dichotomize small business in the West and the East. Had you been able to address that issue, your article may stud with another star.

Upananda , Sri Lanka

Tim Minshall

Dear Tim,

Thanks for your approach and apologize for late response for an inspiring answer.

Although Perose's RBT theory, along with Corner's contribution, has great impact on explaining the growth of small businesses, it ignored the impact of social context the level which cannot be challenged by the temporal contextual changes.

Upananda, Sri Lanka

Some of the forces impacting your small business are more challenging to master than others. The degree to which you can control them varies. At the same time, you can improve the state of internal and external factors effecting your small business; you can't make the economy grow, but you can encourage spending. Understanding the factors at work better equips you to prepare for them.

I think that the major internal factors that contribute to make small business big are: customer focus, continual improvement, and knowledge management.

VISION is the most important factor.

Innovation may make the difference both in terms of survivall of younf-small firms and in terms of their growth into middle size companies. See the article attached:

There is a dearth of studies on very high-growth phenomena, and this topic has been capturing my research interest over the last few years. In particular, the role of resources has yet to be clarified, as scholars have not sufficiently addressed the question of whether more resources are better for very high-growth; in fact, an important but still open debate suggests that, while resources might be valuable, resource-scarce or efficiency-driven behaviors may be more “entrepreneurial” and conducive to very high-growth. Bearing this in mind, I have found the “slack” argument very interesting. I focus on slack resources as they are defined as ‘in excess’ resources (Cyert and March, 1963) that can be specifically valuable in helping a firm pursue strategic and growth-oriented and entrepreneurial behaviors.

I can provide more detail, if of any interest

best

Tommaso Minola

Thanks for your comment,

One thing that you may have missed is the context. No matter what resouces you have unless the business is imbedded in a conducive context. Please see Welter (2010),

Upananda

M Vivarelli ,your article is excellent.

Tommaso Minola, please supply further details ,thanks

I am fully agreeing with you about the excellence of Vivrelli's article.

Upananda

The article by M.Vivarelli, is well written,comprehensive,is not only theoretical but contains practical implications.However, surprised no reference is made to Mark Casson s work on entrepreneurship

the uniqueness of the small business and the very strong influence of owner-manager are the key factors that should not be missed out. I believe 'all' small businesses want to grow big, however, being small also has some advantages. the facts may be true to some businesses but at the same time it is not applicable to other, even, the firms with similar characteristics. I believe context plays its role but it should be viewed from the interplay between the internal and external factors.

Gregory, as a former business owner of over 15 years, I totally agree with you.

I was in the wholesale b-2-b manufacturing business and I saw many good, viable businesses with good products fail because of poor leadership, ignorance of best management practices, and poor culture that was shaped by autocratic owners/leaders. Lack of proper funding just acerbated the problem. There is no one answer that can provide the solution to this since many aspects come to bear and each has its own cascading effects upon the other. Nevertheless, you have provided an excellent synopsis of some of the more salient points, Gregory :)

Gregory L Alston /Ruth,

Thanks for responding to question promptly and attentively. However, I believe that resource use efficiency has not been cited as an internal factor for growth. If you recollect your memories while you are in business, you may recall the concept of resource use efficiency.

Please address these questions from your past experience.

How you selected to raw material, business process, geography of market, and assigned responsibilities. then you may infer to what extent you are efficient in resource use. Penrose (1959) use only the human resource use efficiency but she lead the way how it could be expanded to other areas as well.

Upananda

I believe that indicative internal factors that contribute to make small business big, are the capability of adaptation to knowledge changes' spur, the appropriate human resource management, the effective implementation of operational and long-term strategic plans, the achievement of economies of scale, the innovative orientation, as well as the perspective of internationalization towards a global firm in the hosting countries, in case of experiencing extreme liquefied economic conditions within the local marketplace. Besides, a precise formulation of the strengths, weaknesses, opportunities, and threads, for each firm (SWOT analysis), should enable their prosperous entrepreneurial operation and last longing profitability.

Dear Dr_Grigorios_Kyriakopoulos,

thanks for your interesting answer.

Upananda

The following are important for the success of SMEs

New product development

Product rejuvenations

Product modification

Dear Mohamad,u

what you have mentioned is not internal factors. In order to take place what you have mentioned need some internal factors. For example, resource use efficiency.

Upananda

Are you concerned about small businesses in rural USA, or how to instill the seed of a dream into poorly financed and poorly connected African entrepreneurs with potential to provide early foundations of private sector industrial expansion?

Without addition context, I think answers will be poorly targeted. 

I regard this as one of the holy grails in development. Where will the jobs come from? Small business can fill in a million gaps and play hugely important roles in economies, but at the end of the day, big players are needed for practical reasons to carry out many types of projects (public or private) and at present domestic capacity is often lacking. 

I think it may be cultural. Some places, the pursuit of excessive wealth is disdained as a fool's errand chasing dust and feathers in the material world. But that material world is the one which provides jobs, sustenance, etc.

Whose small business? Where? Why should they want to grow? 

Could not have said it better Gregory !!

Great synopsis.  If more businesses operated on these principles they would be successful. 

I operate in a small open island economy and so would adopt and adapt/extend your principles as;

1-Does the business have a value strategy that resonates with the global marketplace?

2-Can the leadership build a process that continually enhances value for the global marketplace?

3-And is the business managed according to a sound management principles grounded in global best practices ?

Great ideas fail without great leadership. Great Leadership fails without a good value strategy. And no business is sustainable if it is financially irresponsible. And a great idea at the wrong time may not work simply because the marketplace wasn't ready yet

Again,  good stuff  !!

The Entrepreneurial Marketing.

Strong business plan, strong team and strong market. Without those three things, it is more likely your small business will fail and business plan is the one that is often ignored by small businesses. The logic is we always start by a very limited resource and therefore we need business plan and strong team so that we can deal with incoming problems and avoid too much costly trial and error, innovation is also important but about 70% of it fails in the market because it was not focused on what market wants and needs