Int. J. Pure Appl. Sci. Technol., 3(2) (2011), pp.

128-140

International Journal of Pure and Applied Sciences and Technology

ISSN 2229 - 6107 Available online at www.ijopaasat.in
Research Paper

Factors Influencing the Performance of Entrepreneurs in the Kumasi Metropolis of Ghana

Fred Nimoh1, Enoch Kwame Tham-Agyekum2, * and Edna Osomea Aduamah3
1 2 3

Department of Agricultural Economics, Agribusiness and Extension, KNUST-Kumasi Department of Agricultural Extension, University of Ghana, Legon-Accra Department of Agricultural Economics, Agribusiness and Extension, KNUST-Kumasi

*Corresponding author, e-mail: (donsprakels@yahoo.com) (Received: 10-02-11; Accepted: 22-02-11)

Abstract: The factors influencing the performance of entrepreneurs were studied.

Purposive sampling was employed to select ninety respondents. Both descriptive and inferential statistics were used to analyze the data. Results showed that the performance of most of the entrepreneurs in trade and manufacturing was good for both total and net revenues. The level of performance of the entrepreneurs was dependent of sex, type of business, need for achievement, risk taking ability, good customer service, good employees and the quality of goods sold. Entrepreneurs are encouraged to diversify their operations since it will help reduce their total cost incurred in business operations.

Keywords: Entrepreneurs, Factors, Kumasi Metropolis, Net Revenue, Performance.

1. Introduction
Recently, there has being an increasing emphasis placed on the importance of entrepreneurs as means of stimulating economic growth of a nation. Entrepreneurs always seek to realise profit, achieve growth and obtain sustainability in the businesses they are engaged in. Entrepreneurs have been credited with employing half of all private sector employees (Peake

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& Marshall, 2009). There are certain factors that will cause entrepreneurs to succeed in their businesses. According to GlickSmith (1999) the components of a successful business are a competent entrepreneur, a viable business concept and an access to adequate capital. In order to achieve these objectives, the entrepreneur is required to perform well in his field of work.

Meng & Liang (1996) measured performance of an entrepreneur on the basis of their net profit growth, sales revenue growth, return on investment and market share. Masuo et al., (2001) also found out that economic or financial measure such as return on assets, sales, profits, employees and survival rates and non pecuniary measures, such as customer satisfaction, personal development and personal achievement are used to measure performance. In another study by Nanhou & Duffy (2002), success was measured in terms of financial gains (profitability). This study measured the performance of entrepreneurs based on their total and net revenues.

Most entrepreneurs in the Kumasi Metropolis have been found not to be able to achieve their objectives for which they establish their businesses. There are issues of location of their businesses, the type of business, customer care services, risk taking abilities, quality of goods sold, and start-up finance, experience of the entrepreneurs and total cost of operation. This study therefore seeks to find out the factors that affect the success of entrepreneurs in the Kumasi Metropolis of Ghana. In the long- term, how are they able to cope with issues of lack of capital, poor markets and inadequate resources which are seen as some of the problems that entrepreneurs encounter? What are the levels of the performance of entrepreneurs in the Kumasi Metropolis? What are the factors that affect their performance? Is there any relationship between the socio-economic factors of the entrepreneurs and their performance? What constraints militate against the success of the entrepreneurs in the study area?

2. Methodology
The Kumasi Metropolis was selected as the area for the research study. It was chosen because the city is characterised by different types of people engaged in different types of entrepreneurial activities. Three areas within the Kumasi Metropolis were selected: Adum, Oforikrom and Ayeduase. Ninety (90) respondents comprising 30 traders (book stores, boutique and cooked food sellers), 30 service providers (hair dressing, furniture repairs, barbering, photocopier operations) and 30 manufacturers (small-scale shoe manufacturing)

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were selected as the study sample. Primary data was basically used in this study. Data was collected through the administration of questionnaires to entrepreneurs. The purposive sampling technique was employed to select the respondents. Both descriptive and inferential statistics were used to analyse data for the study.

Analytical Methods Factors influencing entrepreneurs performance To identify the factors influencing the performance of the entrepreneurs, the respondents were asked to list the factors that they perceived to be influencing their performance. The factors also included in the survey were innovativeness, marketing opportunities, government support and record keeping. Kendalls coefficient of concordance (W) was used to rank the entrepreneurs perception on the factors influencing their performance.

The population parameter estimated by the Kendalls (W) is represented by the notion W. The range of possible factors within which K may fall is 0 W 1. Where there is a complete agreement among the set of ranks, the values of W is equal to 1 (one) and where there is a pattern of agreement among set of ranks, the values of W will be equal to 0 (zero).

The mean scores are found on the basis of the ranking factor, the smaller the value of the mean score of the reasons, the most important will in that reason. The second smaller mean score is the second most important and this follows in that order to the very least important. This method identifies whether there is an agreement or not between the factors. W= (T2-(T) 2/N) N K2= (N2-1) 12 K is the number of rankers (entrepreneurs) N is the number of factors (innovativeness, marketing opportunities, record keeping and government support). T is sum of ranks factor being ranked.

Effects of Personal and Business Factors on the Total and Net Revenues The effects of factors such as age of the entrepreneur, number of employees, total cost, startup finance, lack of capital, inadequate resources and experience on performance of the entrepreneur were determined using the linear regression model.

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Y = f(X1, X2, X3, X4, D1Dn) The model for this study with its a-priori expectations are specified as: Y = (a+ B1TC + B2SF + B3NE + B4EL + B5E+ B6PM + B7IR+ B8L) + Where Y = Total revenue and net revenue per year. TC = Total cost including fixed and variable costs SF = Start-up finance NE = Number of employees EL = Educational level E = Experience PM = Poor market IR = Inadequate resources L = Lack of capital B1B5 are the coefficient of the independent variables which are to be determined. + + + + + + + -

Definition of Variables Dependent Variable: Total Revenue and Net Revenue The performance of the business in this study is measured by total revenue and the net revenue per year. In order to minimize the chances of not getting accurate information from respondents on how much was made per year, the entrepreneurs were allowed to state on the average how much they received as total revenue and total cost per annum for 2008 and 2009 which was used to compute the net revenue.

Independent Variables Total Cost: Total cost was made up of fixed costs and variable costs. Fixed costs consisted of monthly payments for rent and salaries. Variable costs comprised monthly payments for electricity, water, telephone, wages for assistants and miscellaneous payments. It is assumed in this study that the higher the total cost of the business, the larger the total revenue is likely to be Mohammed et al., (2009). Thus, the sign of the coefficient for total cost is expected to be positive.

Educational Level: The highest level of education attained is likely to affect the level of skills and experience one may take into the business. The level of education is therefore

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assumed to influence the total revenue of the business positively. Therefore, the sign of the coefficient for the education variable is expected to be positive.

Number of Employees: It is assumed in a study by Mohammed et al., (2009) that the number of employees in the business indicates how large the business is. The size of the business is assumed to influence total revenue positively. The sign of the coefficient of the variable for the number of employees is therefore also expected to be positive.

Start-up Finance: The greater the amount of start-up finance for the business, whether from the government or from private source, is expected to have a positive influence on total revenue. The sign of the coefficient of the variable for start-up finance is therefore expected to be positive.

Age and Experience: The age and experience in business is expected to have a positive impact on the entrepreneurs performance. The older an entrepreneur is, the more experience in business he has and gets new ideas as to how to manage his business. This same effect is expected for the entrepreneurs experience in business.

3. Results and Discussion

Level of Performance of Entrepreneurs Total Revenue of the Entrepreneurs Table 1: Level of performance of the entrepreneurs (Total Revenue) Type of Enterprise Good Trade Service Manufacturing Source: Field Data, 2010 22.22 16.67 15.56 Level of Performance No Change 7.75 21.13 7.78 Poor 3.33 5.56 10.0

Total revenue of entrepreneurs was rated. The performance of most (22.22%) of the entrepreneurs involved in trade was good, 7.75% showed no change whiles 3.33% were poor in their total revenue over the two years (2008-2009). With those in the service business, majority (21.13%) of the respondents showed no change, 16.67% were good and 5.56%

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performed poorly in the total revenue. For manufacturing, majority (15.56%) performed good with 10% performing poorly. This means that the general performance for total revenue was good for only trade and manufacturing whiles that of service saw no change.

Net Revenue of Entrepreneurs Table 2: Level of performance of the entrepreneurs (Net Revenue) Type of Enterprise Good Trade Service Manufacturing Source: Field Data, 2010 22.22 16.67 15.56 Level of Performance No Change 7.75 21.13 7.78 Poor 3.33 5.56 10.0

Net revenue of entrepreneurs was rated. It can be observed that most (22.22%) of the entrepreneurs involved in trade were performing good in terms of their net revenues, 7.75 saw no change whiles 3.33% performed poor in their net revenue over the two years. With those in service, majority (21.13%) of the respondents saw no change, 16.65% performed good whiles 5.56% performed poorly in the net revenue. For manufacturing, majority (15.56%) performed good with 10.0% performing poorly. The performance rating based on the net revenue for the two years showed similar results as the data obtained for the total revenue. What this means is that the general performance for net revenue was good for only trade and manufacturing whiles that of service saw no change. The reason could be that as the total revenue of the entrepreneurs increased, their net revenue also increased.

Relationship between the Socio-Economic Characteristics and the Level of Performance Table 3: Relationship between the Socio-Economic Characteristics and the Level of Performance Factors Age Sex* Marital status Educational level Household size Chi-square 7.45 8.14 5.62 8.60 1.59 df 6 2 4 8 4 Significance 0.28 0.017 0.22 0.37 0.81 Results Independent Dependent Independent Independent Independent

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Number of employees Duration in business Revenue year Cost per year Start-up finance Type of business** Source: Field Data, 2010

3.86 4.87 6.24 6.12 7.63 32.68

6 8 8 6 8 4

0.69 0.77 0.62 0.401 0.47 0.00

Independent Independent Independent Independent Independent Dependent

Key: * and ** denote significance at 5% and 1%, respectively

The chi-square test of independence was employed to measure the relationship between the socio-economic characteristics of entrepreneurs and their level of performance. The categories used for performance was good, poor or no change in either total revenue or net revenue. It was found out that level of performance based on total revenue and net revenue was dependent of the sex of the entrepreneur and the type of business entrepreneurs were engaged in. Similarly, Peake & Marshall (2009) found that being female (sex) was found to significantly increase the chances of an entrepreneur participating in a start-up and performing well.

Factors Perceived by the Entrepreneurs as Influencing their Level of Performance

Table 4: Factors Influencing Entrepreneurs Performance

Factors Need for achievement Risk taking ability Good customer service Good employees Affordability of their goods Experience in business

Frequency 56 60 78 45 54 61

Percent (%) 62.2 66.6 86.7 50.0 60.0 67.8

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Age of entrepreneur Type of goods sold Quality of goods sold Locus of control

30 79 45 40

33.3 87.8 50.0 44.4

Source: Field Data, 2010

Other factors apart from the socio-economic factors were identified by the entrepreneurs as influencing their level of performance. Respondents indicated the type of good sold (87.8%) as the most influential factor affecting their level of performance. This was followed by good customer service (86.7%), experience in business (67.8%), risk taking ability (66.6%) and need for achievement (62.2%). Other studies by Staw (1991) and Sukardi (1991) have showed that success or performance of an entrepreneur is closely connected with experience and risk taking ability.

Ranking of the factors identified by the entrepreneurs Table 5: Ranking of specific factors by the entrepreneurs Factors Influencing Performance Innovativeness Government support Record keeping Marketing opportunities Source: Field Data, 2010 Rank Total 124 360 152 176 Ranking 1st 4th 2nd 3rd

To ascertain the degree of agreement between the factors identified by the entrepreneurs, the Kendalls Coefficient of Concordance (W) was employed. The results showed that innovativeness ranks first as the factor influencing level of performance of entrepreneurs the most. This was followed by record keeping, marketing opportunities and government support. Drucker (1985), Sukardi (1991) and Holt (1992) also underlined innovativeness as a necessary condition to become a successful entrepreneur. Mohammad et al., (2004) also found record keeping to be a key practices used by very successful farmers.

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Effects of Factors on the Level of Performance of the Entrepreneurs Effects of the Factors on the Total Revenue Table 6: Factors Influencing Total Revenue of Entrepreneurs Variable TC SF NE ED EX PM IR LC C Coefficient 6.65*** 1.23*** -176.1 -1152.5 346.7* 3033.9 -24.2 -2357.7 1339.9 T-Statistics 3.37 3.42 -0.39 -1.36 1.70 1.22 -0.008 -0.73 0.27 Probability 0.0011 0.0010 0.6950 0.1755 0.0923 0.2226 0.9936 0.4681 0.7841

Source: Authors computations, 2010

R-squared - 0.306 Adjusted R-squared - 0.24 F- Statistic - 4.48 Key: *** * denote significance at 1% and 10% respectively

USD 1= GHC 1.54

Factors such as start-up finance of the business, number of employees of the entrepreneur, total cost incurred by the entrepreneur in his operations, inadequate resources, and lack of capital were used in the regression model. The coefficient of the total cost, start-up finance and experience showed positive and significant at 1% and 10% respectively. This means that the total cost of a business has a high probability of positively influencing the entrepreneurs performance. This confirms the statement in a study by Mohammad et al., (2004) on the effect of total cost on the performance of the entrepreneurs as, the greater the total cost the higher the revenue is likely to be because of the effect of economics of scale. From the results it can be observed that a GHC 1 increase in the total cost will increase total revenue by GHC 6.65.

Start-up finance also had a positive effect on the performance of the entrepreneurs and this also confirms the results of Mohammed et al., (2004) which also showed a positive effect of start-up finance on performance. From the results it can also be deduced that GHC 1 increase

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in the start-up finance of a business will increase the total revenue by GHC 1.23. Experience also had a positive influence on the total revenue of the entrepreneurs. This implies that an additional year increase in the period of operations will influence the total revenue by GHC 346.71.

Effects of the Factors on the Net Revenue Table 7: Factors influencing Net Revenue of Entrepreneurs Variable TC SF NE ED EX PM IR LC C Coefficient 5.65** 1.23*** -176.13 -1152.51 346.71* 3033.95 -24.21 -2357.74 1339.96 T-Statistics 2.865 3.420 -0.393 1.366 1.704 1.23 0.008 0.728 0.23 Probability 0.053 0.001 0.695 0.575 0.092 0.222 0.993 0.468 0.784

Source: Authors computations, 2010

F- Statistic - 0.275 R-squared - 0.203 Adjusted R-squared - 3.842 Key: *** ** and * denote significance at 1%, 5% and 10% respectively

USD 1= GHC 1.54

The same factors such as start-up finance of the business, number of employees of the entrepreneur, total cost incurred by the entrepreneur in his operations, in-adequate resources, and lack of capital were used in a regression model to estimate the effect of the factors on the net revenue. The coefficient of the total cost, start-up finance and experience were all positive and significant at 5%, 1% and 10% respectively. This means that the total cost of a business has a high probability of positively influencing the entrepreneurs performance. This confirms the statement by Mohammad et al., (2004) on the effect of total cost on the performance of the entrepreneurs. From the results it can be observed that a GHC 1 increase in the total cost will increase total revenue by GHC 5.65.

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Start-up finance also had a positive effect on the performance of the entrepreneurs and this also confirms the results of Mohammed et al., (2009). From the results it can also be deduced that GHC 1 increase in the start-up finance of a business will increase the total revenue by GHC 1.23. Experience also had a positive influence on the total revenue of the entrepreneurs. From the results, it is shown that with an additional year increase in the period of operations, it will influence the total revenue by GHC 346.71.

The criteria for business success as employed by Meng & Liang (1996) and Prihatin (2004) are above 6% and 25% respective increase in business revenue. While 6% and 25% may seem to be low figure, it is rather significant as a criterion for business success because this research study stresses a variety of indicators. It could be deduced from the results obtained for both total and net income that entrepreneurs in the Kumasi Metropolis are succeeding in their respective businesses.

Constraints of Entrepreneurs Table 8: Constraints of Entrepreneurs Factors High rates of using market facilities Theft Non conducive place of work Difficulties in obtaining loans Source: Field Data, 2010 Frequency 58 67 56 71 Percentage (%) 64.4 74.4 62.2 78.8

Data obtained from the entrepreneurs showed that the majority (78.8%) of them are faced with difficulties in obtaining loans from financial institutions. About 74.4% of the entrepreneurs are also faced with issues of theft, 64.4% are faced with high rates of using market facilities and 62.2% are faced with non conduciveness of their place of work.

4. Conclusions and Recommendations

It can be concluded from the study that the level of performance as perceived by the entrepreneurs is good. The chi-square test of independence showed that the level of performance of entrepreneurs is dependent on sex at 5% and the type of business at 1% significant levels respectively. The factors that contributed to the performance of the

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entrepreneurs aside their socio-economic characteristics were the need for achievement, risk taking ability, good customer service, good employees, affordable goods and quality of goods. The effect of the characteristics on the total and net revenues of the entrepreneurs showed that both start-up finance and experience of the entrepreneurs had a positive effect on the revenues at 1% and total cost was also positive at 10% significant levels. The major constraint that the entrepreneurs faced in the Kumasi Metropolis was difficulty in obtaining loans from financial institutions.

Entrepreneurs are encouraged to increase or diversify their operations since it will help reduce the total cost incurred in business operations. When there is diversification, the entrepreneur can get enough revenue from the various sections to help reduce the total cost of operations. Entrepreneurs who want to start new businesses are encouraged to start with a high capital if only they can raise it. Starting up with a higher capital will earn more revenue due to the principle of economics of scale. Entrepreneurs are encouraged to go on with their business since a longer period will make them more experience and this will increase their revenue. Entrepreneurs are encouraged to boost their customer care services since it will help them get more customers and on the other hand increase their revenue. Entrepreneurs are encouraged to be innovative in their business. Being innovative attracts more customers for the business thereby increasing revenue. Entrepreneurs should also keep records of their interactions since it will help them make amends and progress in their performance.

References
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[7] V. Nanhou, and M. Duffy, Factors of success of small farmers and the relationship between financial success and perceived success, Abstracts, 3rd National Small Farm Conference, Albuquerque, NM. September 17-20, (2002). [8] W. O. Peake and M. I. Marshall, Uncovering what helps entrepreneurs start businesses: Lessons from Indiana, Journal of Extension, 47 (2009). [9] D. R. B. Prihatin, Factors Influencing The Success of Small-Scale Entrepreneurs in Indonesia, Atmajaya Indonesia Catholic University, Jakarta, Indonesia, (2004). [10] I. S. Sukardi, Intervensi Terencana Faktor-Faktor Lingkungan Ter-Hadap Pembentukan SifatSifat Entrepreneur (entrepreneur traits), Unpublished doctoral dissertation, University of Indonesia, (1991).