Time Required to Break-Even for Small and Medium Enterprises: Evidence from Kenya

Abstract

The past two decades have seen exponential growth in the number of small and medium enterprises in Sub-Sahara Africa; however, about two-thirds of such enterprises often fail to take off, resulting to negative economic impacts at the micro and macro-levels. However, documentation of the subject remains limited, especially in Kenya. This study involved 146 enterprises that had been operational for between 1 and 5 years. Inclusion criteria included availability of consistent financial records as well as willingness to share such information. The findings showed that the duration taken to break-even ranged between 3 and 40 months. The level of training in financial management was the most important covariate, explaining up to 12.1% of variation in the duration taken to break-even. Ever training in financial management accounted for 10.2%, marketing (9.7%); educational attainment (8.6%), capitation-funding level (7.5%) and firm size (6.8%). The study recommends the need for universal entrepreneurship training programs, integration of entrepreneurship training in national plans, a multisectoral approach to entrepreneurship training, linkages between the private sector, academia and development partners as well as support centers at the county level to facilitate the development of such enterprises.