Predictive model for small scale businesses in Uganda: a case study of Kampala district

Abstract

This study was meant to establish the predictive model for small scale businesses in Uganda. Uganda is an entrepreneurial country and according to the Global Entrepreneurship Monitor (GEM), 28% of adults own or co-own a new business. However, while almost 10% of Ugandans start a business in a year, a fifth of the individuals aged 18-64 discontinue a business in the past year. Thus, the study established a model using various factors affecting businesses in developing countries such as age, source of funding and sex of business owners to predict business success. With this knowledge at hand, business projects that are heading for failure will be identified earlier before they are started and thus minimize resource wastage. The data used was collected via close ended questionnaires given to small scale business owners employing at least four people, entered into an excel spreadsheet and then analyzed in STATA. Business success or failure was measured in terms of profitability (high or low) and chi square statistic and logistic regression were used to establish this relationship. The findings of the study showed that background characteristics of business owners, business characteristics and capitalization of businesses significantly affect the success or failure of businesses. This is because female owners are likely to lead their businesses to higher profitability than males. Owners aged 36 years and above are more likely to lead their businesses to higher profits. Owners with a higher education level are more likely to earn higher profits in their businesses. Businesses started with sufficient capital are more likely to generate higher profits for owners. High capitalization of businesses leads to higher profitability. The study recommends that business owners should try to attain higher levels of education so as to apply the attained knowledge into business improvement in order to generate higher profits. Government should also create incentives for easy accessibility to credit or capital by small-scale businesses for example through reduction of interest rates on loans, encouraging people to accumulate personal savings to invest in their businesses. Business owners should draw a business plan on how the business is run as this helps to know how the business is going to achieve its objectives. Record keeping is very essential in business as this helps the owner to keep track of the stock, sales, revenue, costs and then profits.