Abstract: The small and micro enterprises (SMEs) play an important role in the Kenyan economy, they are the sources of innovation in products, technology and services, provide a competitive check on existing firms, contribute to industries where optimal size is small and create jobs in formal and informal sectors..SMEs play a fundamental role in the economy, but despite their significance, past statistics indicate that three out of five businesses fail within the first few months of operation. This study aimed at examining the effects of strategy development on sustainability of Smes in Kenya while using Thika town as a case study. Kaplan and Norton (1992) Balanced Scorecard was adopted to create and test measures of sustainability appropriate to SMEs, Porters five forces of competitive position was also adopted. Data was collected from 50 small and Micro-enterprises within Thika town. The results showed that competition, financial resources, government regulations and entrepreneurial skills affect strategy development of SMEs. Majority of the SMES felt that high cost of business licenses, lack of sufficient capital, Changes in customer expectations and competition from existing and new competitors is are aspects that have an effect on sustainability of SMES.