The impact of service quality on the viability of start-up businesses

Abstract

A 3-year long survey was conducted in the Tshwane geographical region of Gauteng Province in South Africa in order to identify and quantify key predictors of adequate municipal services that are routinely provided to customers who operate newly established small businesses in the City of Tshwane, Pretoria, South Africa. Data was collected by using a structured, pre-tested and validated questionnaire of study from a stratified random sample of size 1, 058 small businesses. The key objective of study was to assess the relationship between viability in small businesses and the provision of quality municipal services by the City of Tshwane. The study was conducted against the background of a high failure rate among newly established small businesses in the City of Tshwane. The study was conducted over a 3-year period (2012 to 2014). Data was collected monthly during the three-year period of study on socioeconomic variables that are known to affect the perception of business operators on the quality of municipal services to business operators and the general public. Statistical procedures such as cross-tab analyses, panel data analysis, Markov Chain Monte Carlo (MCMC) algorithms and Bayesian methods were used for estimating parameters. The study showed that there was a significant association between positive perception of business operators on the quality of municipal services provided to them and viability of businesses. The results showed that 87% of viable businesses were satisfied with the quality of routine municipal services that were provided to them by the City of Tshwane. The corresponding figure for non-viable businesses was only 14%. The viability of businesses was significantly influenced by 3 predictor variables. These predictor variables were: lack of capacity for fulfilling the business and entrepreneurial needs of newly established businesses [Hazard Ratio = 3.58; P=0.000; 95% C. I. = (1.45, 5.46)], inappropriate policy [Hazard Ratio = 3.19; P=0.000; 95% C. I. = (1.39, 5.28)], and lack of tailor made training programmes directed at newly established small businesses [Hazard Ratio = 2.89; P=0.000; 95% C. I. = (1.24, 4.77)], in a decreasing order of strength. Similar findings were obtained from the analyses of in-depth interviews.