Creating a Business Sophistication Index for Small and Micro Businesses
Jacky S. Galpin
School of Statistics and Actuarial Science, University of the Witwatersrand, Johannesburg, Gauteng, South Africa

Finmark Trust, a Non-Governmental Organisation (NGO) operating in Africa, conducts surveys of small businesses, in order to determine what their needs are. The development of small businesses is seen as the way forward in developing economies and creating jobs. A survey was conducted in 2010, aimed at establishing how many small businesses there are in South Africa, and what their characteristics and needs are. As part of the project, a Business Sophistication Measure was needed, in order to examine the differing needs of businesses at differing levels of business size and sophistication. This paper outlines the methods of the development and validation of the index, and discusses the issues involved. Statistical methodologies used include principal component analysis of weighted survey data, exploration via CHAID, and validation using multivariate techniques. The differing characteristics and needs of the segments are discussed.

Keywords: Business sophistication index; Multivariate statistics; CHAID

Biography: Jacky lectures survey sampling and official statistics at postgraduate level. She also supervises students in the area of survey sampling (including missing data and data fusion), small area estimation, analysis of longitudinal and cross-sectional data using mixed models. She has also been involved in consulting work for many years mainly in the market research and other industries. She is also a member of the South African Statistics Council which has oversight over Statistics South Africa.