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Small and Medium Enterprises (SMEs) are crucial to Zambia’s economic growth but continue to face challenges in sustaining profitability. This study examined the effect of firm characteristics on SME profitability, aiming to (i) identify the most influential characteristic and (ii) analyse their relationships with profitability. The characteristics assessed included firm size, firm age, debt finance, liquidity, and sales growth. Data were collected from 270 SMEs registered with the Patents and Companies Registration Agency (PACRA) across seven urban centres: Livingstone, Lusaka, Kabwe, Ndola, Kitwe, Chingola, and Chililabombwe, using structured, face-to-face questionnaires. Systematic random sampling was employed, and data were analysed using factor analysis, Pearson correlation, regression, and Chi-square tests. Results showed that firm characteristics collectively have a significant effect on SME profitability, though individual relationships were weak and statistically insignificant. Among the characteristics, sales growth had the strongest influence. However, regression results (R² = 0.002, F = 0.237, p = 0.790) indicated very weak predictive power, suggesting that firm characteristics explain only 0.2% of profitability variance. This implies that SME profitability in Zambia is influenced by the combined interaction of factors rather than individual characteristics. The study contributes new insights by identifying sales growth as the most influential factor, highlighting that sales growth drives SME profitability even in resource-constrained contexts like Zambia. Policymakers should prioritise integrated strategies that foster sales growth through innovation, market diversification, and digital marketing, while enhancing liquidity through accessible, low-interest financing. Financial policy reforms should prioritize accessible, low-interest financing mechanisms that enhance liquidity and sustainable debt utilisation.

This study examines the most significant challenges facing Small and Medium Enterprises (SMEs) in South Africa, drawing on firm-level data from the 2022 World Bank Enterprise Survey. Using probit regression analysis, it explores how firm size, sector, geographic location, and female ownership influence the severity of perceived business constraints—namely, access to finance, infrastructure, regulation, workforce skills, crime, and the informal sector. The results indicate that sectoral differences are the strongest predictors of obstacle severity. Due to their capital and logistics needs, sectors such as Fabricated Metal Products, Construction, and Retail face heightened financial and transport challenges. Regionally, firms outside Gauteng, KwaZulu-Natal, and the Western Cape report more severe infrastructure issues, particularly electricity, while those within these provinces face greater skills shortages. Medium-sized firms generally report fewer constraints than smaller firms. Female ownership is not a consistent determinant of obstacle severity; however, firms without female ownership perceive corruption and crime as slightly less severe. These findings underscore the need for targeted, sector- and region-specific policy responses, particularly in enhancing financial access for capital-intensive industries and addressing regional disparities in infrastructure and workforce development.