Many small businesses operate without a clearly defined strategic plan and an honest, concise and meaningful mission statement. Charles N. Toftoy and Joydeep Chatterjee argue that this needs to change if the rate of small business failure is to be reduced.
A company’s mission is an enduring statement of purpose that distinguishes its business from its peer firms, identifies its scope of operations, embodies its business philosophy and reflects the image it seeks to project. The mission statement answers the first question of any business venture: What business is it in and what is its reason for being? Establishing this purpose in black and white must come first in order to provide a sense of direction to the company. Companies that do not have a clear and concise written mission statement risk drifting aimlessly in the sea of competitors. A written mission statement forces the small business owner or founder to think about what he/she is doing and where the company is heading.
The Council for the Advancement of Small Business at the George Washington University has provided management consulting services for over 2000 small and medium-sized businesses in the greater Washington, D.C. area. Approximately 85 per cent of the small and medium-sized businesses that sought the services of the Council did not have a mission statement for their business.
“That business mission is so rarely given adequate thought is perhaps the most important single cause of business frustration,” observes Peter Drucker. Such frustration is commonplace. According to a Dun & Bradstreet survey, 40 per cent of small business failures occur between the first and fifth years of inception, 27 per cent fail between the sixth and tenth year, and 33 per cent fail by the time the businesses cross their tenth year. Although there are myriad potential causes for this failure, our hypothesis is that the lack of a wellwritten mission statement is one of the foremost contributors to this malady.
We surveyed 220 small businesses in the greater Washington, D.C. area. Each business satisfied two conditions: annual revenue less than $2 million and fewer than 500 employees. The survey revealed a number of interesting facts. First, most small businesses (64 per cent) do not have a written mission statement, but go by an informal work ethic and philosophy. Another 7 per cent of firms had a mission statement, but it was accessible only by a few top executives. Only 29 per cent of the companies had a written mission statement that was accessible to all employees.
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