Small Business Diagnostic: What Does It Tell Us about SMEs?

Abstract

This paper outlines the findings from a study of 241 small business owner-managers who were asked to complete a diagnostic assessment questionnaire designed to examine their management practices. This was part of a best practice benchmarking study being undertaken by the University of Western Australia (UWA) through its MBA program. Commencing with a pilot study of 21 owner-managers engaged in a business development course run by the Centre for Entrepreneurial Management and Innovation (CEMI) in 2005, the use of the diagnostic tool continued via the MBA program as a teaching mechanism for students studying small business management. The diagnostic assessment tool examines 12 areas of management practice across a range of measures. It compares the firm’s performance against best practice standards and also seeks comment from the owner-manager over problems they are experiencing in each area. The findings from this study suggest that most owner-managers have a relatively good understanding of their customers and how to satisfy their needs. Most were also getting adequate information on key areas such as cash flow, supply and stock turnover. They also indicated an active engagement with outsiders to help keep them informed of trends in their market. However, few had formal business or marketing plans and quality assurance systems. Few also had a systematic approach to product and market assessments, quality control or the development of new innovative approaches to the development of products and services. There were major differences between firms based on size, with micro-enterprises demonstrating much less formality or the use of outsider support than their small and medium sized counterparts.

Keywords: small business, owner-managers, diagnostic assessment