Investment decisions in the context of SMEs: A non-financial factor approach

This study empirically examines the non-financial factors approach to making investment decisions and supports this significant activity in the context of SMEs, based on 16 investment projects and a proposal for a new way to manage non-financial factors. For small and medium-sized enterprises, focusing on non-financial factors in investment decision-making might identify fewer tangible advantages than in financial analysis, but there is not enough information on such factors. That is why the objective of this research is to propose a way to make investment decisions by paying attention to non-financial indicators. This study produces three basic findings. First, nonfinancial measures are widely used in capital budgeting, but nonfinancial measures appear to serve as a partial substitute when there is a lack of information or knowledge to develop other techniques, mainly in the context of SMEs. Second, a proposal method to analyze non-financial factors facilitates a decision to accept or reject an investment project. Third, entrepreneurs very often make blind decisions regarding the investments they should make, either due to a lack of time, information, or knowledge to do so. The way of analyzing the potential impact of investment projects generates the opportunity to position them based on two dimensions that emerge from the combination of the nonfinancial factors used. Additionally, the present study succeeds in presenting and evaluating 16 investment projects, pointing to those that can have a better impact on businesses.