However, entrepreneurs seem to struggle to perform basic managerial tasks that would enable their businesses to thrive. Following McKenzie and Sakho (2010), the survey asks entrepreneurs to assess the difficulty of successfully achieving a series of common business objectives on a four-point scale, from very easy to difficult (Figure 2). Interestingly, the achievement of each one of these objectives was rated as “difficult” or “somewhat difficult” by at least 50 percent of the respondents, indicating the magnitude of challenges faced by the entrepreneurs in the performance of these typical tasks (or perhaps their lack of confidence in their abilities). This perception was also prevalent among focus group participants, who in general felt that it takes much effort to make a business grow, or even stay afloat.

**Figure 2: Self-assessed entrepreneurial ability**

<!-- Start of picture text --> How easy or difficult would it be to...<br>Acquire new machinery, including vehicles<br>Persuade a bank to finance a promising new business opportunity<br>Hire good employees to expand the business<br>Accurately estimate costs of a new project<br>Identify an appropriate location for the business<br>Resolve a dispute with a client or supplier in a different city<br>Control an employee who is not a family member<br>Obtain inputs or raw materials at a good price<br>Properly value your business if you decide to sell it<br>Sell a new product or service to a first-time customer<br>Recognize a new opportunity to grow the business<br>0% 10% 20% 30% 40% 50% 60% 70% 80% 90%<br>Difficult or somewhat difficult<br><!-- End of picture text --> Small firm owners are also less likely to have achieved a high level of education, although their average educational attainment is similar to the population average. On average, firm owners have about 10 years of education, very similar to the average years of education for adult employed men (10.2 years) and women (10.7 years) in the four cities reported in the June 2011 round of the Ecuadorian household survey ENEMDU. However, while 22 percent of employed adults have complete tertiary education and 38 percent have at least some tertiary education, just 7 percent of firm owners in our sample report having completed tertiary education. This suggests that the distribution of skills among firm owners is much narrower than in the overall population.

# **2.3 Firm performance**

Survival rates among surveyed firms are consistent with the rest of Latin America but are higher than OECD averages. It is well documented that the firm selection process tends to be intense and many firms do not survive for long; however, those that survive tend to grow fast and generate enough employment to partly offset the loss from firms exiting the market. However, more than 80 percent of firms interviewed for EMES have operated for more than two years, which is on the higher end of estimates by Bartelsman et al. (2004), who report that 61 to 87 percent of firms that enter the market in a given year still operate after two years in a sample of 14 countries (Figure 3:A). The median age for EMES firms is 10 years and the mean is 12 years, which is consistent with evidence on formal urban firms with 1-50 employees in Ecuador (10 and 15 years, respectively) and in all of Latin America (14 and 19 years, respectively) from 4