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(Phillips & Kirchhoff, 1989). Now in order to examine various factors stopping entrepreneurs from positive business expansion these can be divided into three main categories; exogenous factors, economic factors and management factors.

To begin with, exogenous factors that hinder growth and in many cases the alone survival of the business are classified as those, whose occurrence cannot be (or to a very limited extent) influenced by the entrepreneurs. Natural disasters, thefts, fire damaging the physical assets of business or an illness or sudden death of the entrepreneur fall under this category. According to Gaskill's study (1993) the above mentioned accounted for 30 percent of discontinuance of businesses. Even though exogenous factors are often causes of business' failure to grow or even survive, it is economic and management aspects that we want to focus our attention to in this essay, since they can explain common mistakes made by entrepreneurs and help to draw implications on how to avoid them.

Economic factors affecting growth opportunities of small businesses can be of an external and internal character. 'Know your enemy, know yourself, and your victory will not be threatened. Know the weather, know the terrain, and your victory will be complete' (Sun Tzu cited in Giles, 1910). Thus before entrepreneurs make a decision to start a business they need to examine the external environment. The evaluation of the economic situation in the economy and within the industry will play an important role in timing of the entry. The wrong timing in periods of negative economic growth and expensive credit can cause poor customer consumption propensity and high costs of borrowing of capital necessary for funding profitable investments. Furthermore, the failure to evaluate potential competitors, their product and service offerings and competitive strategies can limit entrepreneurs' ability to differentiate themselves in quality or price and thereby succeed in growing their business.

With regards to internal economic factors affecting small business development, about two-thirds of those businesses that cite economic factors as a reason for failure, indicate that a lack of profits is the primary reason (Watson, 1996). There is, however, a complex link between profits and cash-flows. The lack of profits is often a misclassified imbalance of cash-flows within the business. Insufficient budgeting can lead to disparity between incoming money from customers and outflows to suppliers, overheads and salaries. Such failure of matching revenues with expenses usually arises from allowing excessive credit to customers, building up stocks to unnecessary levels, taking excessive credit from suppliers, investing heavily in fixed assets or under-estimating the effects of inflation (Wood, 1982). Moreover, undercapitalisation of small businesses can lead to the inefficiencies in the production process due to the use of obsolete machinery and a lack of innovation and thus make firm's products or services unattractive on the market, limiting sales and profits and thereby potential growth. According to the survey of 100 failed businesses by Lussier (1995), 32 percent identified undercapitalisation as a primary source of their failure to grow their business.

However, the most frequently cited cause of business failure is somewhat simplistic and all-encompassing notion of 'poor management' (Allen, 1995 cited in P本论文由英语论文网提供整理，提供论文代写，英语论文代写，代写论文，代写英语论文，代写留学生论文，代写英文论文，留学生论文代写相关核心关键词搜索。