The Effect of Startup Capital of the Owner of Small Business Enterprises to their Performance in Uganda: Case Study Kawempe

Abstract

The study sought to establish the effect of startup capital on the performance of small business enterprise. A descriptive research was used and within it a cross section research where data was collected once, was adopted. A total of 80 questionnaires were administered and the study managed to obtain 80 completed questionnaires representing 100% response rate. Data was analyzed descriptively using SPSS software so as to obtain a more statistical analysis of the collected data. Multiple linear regression model was used in this study to establish the relationship between two or more independent variables. Results indicate that sample was proportionally distributed with 25% of respondents came from each region of study (Kalerwe, Mpererwe, Kyebando, Kanyanya). %. Majority of the respondents got their startup capital from their own personal savings (82.5%) followed those who got it from their family (7.5%). Few respondents got their startup capital from friends and banks representing 5.0% each. 50% of the small businesses had their profits within their targeted expectation and also the study results revealed that there was a significant positive effect of startup capital on the performance (profits) of small business enterprise with a p-value<0.05. This implies that the more capital you invest in the business the likely the profits of that business will reflect on that startup capital invested in keeping other factors constant. Therefore less startup capital exhibit a poor performance of small business enterprise in terms of profits. In general the study looked at the effect of startup capital on the performance of small business enterprise. It was observed that there was a significant positive relationship between startup capital and performance of small businesses. It is clear that startup capital is a major constraint on the performance of small business and plays a vital role before one thinks of any business. Furthermore the excessive borrowing has been cited as a constraint in lowering the business profits. This is because increasing proportion of the debt in startup capital could result into high bankruptcy costs which in turn impacts negatively on the business profits. Whereas inaccessibility to credit services is a major impediment phenomenon in that small scale business owners should also go for external financing in order to raise enough capital which in turn will impact the profits of the small business positively. In order to ease people’s access to startup capital, the government should fund capable people with sound ideas of how to start, manage and run small businesses and also formulate plans and policies regarding small business enterprises