Key performance indicators of small business in Russia

Abstract

Lack of transparency predetermines the shortage of private investment in small business. Financial statement presents the only source of information which reflects the performance of a company but does not provide the investor with sufficient data for proper decision making. Therefore, it is mandatory to develop a set of key performance indicators that will assess the viability of a company and reduce investment risks. Specific nature of small business determines the need to use a minimum number of parameters. To develop the system, the author examines two groups of enterprises: with a bankruptcy claim and without it. The data set consists of financial statement indicators and economic indicators. The use of random forest methods and gradient boosting confirmed the existence of differentiating parameters between successful and unsuccessful businesses: short-term accounts payable, profitability ratio, revenue trend, equity to total assets, receivables index, gain and loss on sale. The established system offers high accuracy for company’s success/bankruptcy forecast. Applying the findings will ensure greater transparency and investment attractiveness of small businesses.