Prediction model of business success or failure for Palestinian small enterprises in the West Bank

Abstract

Purpose The aim of this study is to examine the factors that lead to success or failure of a small business in the West Bank of Palestine. Design/methodology/approach This study methodology is a survey research, testing the Lussier model of business success and failure with a sample of 246 small businesses (90 failed and 156 successful) to better understand the reasons of their success or failure using logistic regression statistical analysis. Findings The model is significant (p = 0.000); it will predict a group of businesses as successful or failed more accurately than random guessing 99 per cent of the time. The model will also predict a specific small firm as successful or failed 94 per cent of the time vs. 50 per cent for random guessing. The r-square is very high (r = 0.70), indicating that the model variables are, in fact, significant predictors of success or failure. Results indicate that having adequate capital, keeping good records with financial controls, making plans and getting professional advice on how to manage the firm are the most important factors for the viability and success of small businesses. Practical implications With the high rate of small business failure globally, results of this study provide a list of variables that contribute to the success of small firms. Firms that focus on these important factors will increase their odds of success. Thus, avoiding failure, firms better utilize resources that contribute to economic growth. Originality/value This is the first study that looks at success and failure of small businesses in Palestine. There is no one single accepted theory that may be applied to small businesses. This paper aims to further contribute to the global validity of Lussier success and failure model moving toward a theory to better understand why some businesses succeed and others fail.