 Impact of Cost Control on Profitability of Small Businesses Units in the USOluwafunmilayo Adekemi Oyewole
Post-Print from HAL Abstract: When costs are carefully monitored and aligned with revenue patterns, small firms can make better pricing decisions, allocate resources efficiently, and manage demand fluctuations more effectively. However, many small businesses struggle with consistent profitability and long-term survival, with nearly half failing within five years and only about one third surviving beyond ten years in the United States. Despite access to accounting tools, weak cost control practices, limited financial expertise, informal record keeping, and rising operational expenses such as labor, materials, rent, and utilities continue to undermine their financial stability. This study examined the impact of cost control on the profitability of small business units in the United States. The study was anchored on Resource-Based Theory, as effective cost control is viewed as an internal strategic capability that enables small businesses to utilize their limited resources efficiently and sustain competitive advantage, thereby enhancing profitability. The study adopted a survey research design to collect primary data from owners of small business units, with a sample size of 200 respondents selected using the snowball sampling technique. Data were gathered through an electronic questionnaire using a five-point Likert scale ranging from very low extent to very high extent. Frequency analysis was used to summarize the data, while ordinal regression was employed to test the hypothesis regarding the nexus between cost control practices and profitability. The findings revealed that effective cost control practices significantly enhance the profitability of small business units (β = 1.941, p = 0.000), suggesting that disciplined financial management is critical for sustaining business performance and long-term survival. Hence, small business owners should actively implement structured cost management systems. Owners and financial managers should regularly monitor expenses, maintain detailed records of operational costs, and review expenditures to ensure that resources are allocated efficiently, which can directly support profitability and long-term financial stability. The study offers both empirical and theoretical contributions by demonstrating that structured cost management systems function as strategic internal capabilities that enhance profitability. Empirically, the findings show that consistent expense monitoring and disciplined cost allocation significantly improve financial performance among small businesses. Theoretically, the results reinforce the view that effective cost control represents a resource-based capability that strengthens long-term financial sustainability. Date: 2026-02-28 Published in Journal of Economics and Trade, 2026, 11 (1), pp.196-210 There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it. Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05532155 Access Statistics for this paper More papers in Post-Print from HAL |
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