Abstract

Small business failure has been a wider problem in Somaliland in general and Burao in particular for years. Therefore, this study was conducted to identify internal and external causes that contribute to small business failure in Burao, Somaliland. This study was a survey research in which questionnaires were used to collect data from 200 respondents who were owners of failed small businesses. The data was analyzed using descriptive statistical tools with help of SPSS 21. Moreover, Relative Importance Index (RII) was employed to ascertain the most significant internal and external factors that cause small business failure in Burao, Somaliland. With regard to factors caused failure of the small businesses, the study found that the most powerful internal causes were: Lack of consultation with experienced and professional business people; ineffective advertising or promotional strategy; poor business site location; lack of knowledge of current business situation, lack of specific target market. Furthermore, the study exposed that the most significant external causes that brought small business failure were: poor economic conditions; high operating expenses like rents and wages, higher competition.

Key words: Internal causes, external causes, small business failure.