Improvimg of SMEs performance need good management system. The purpose of this research is analyze the factors influencing the performance of SMEs and to determine whether the variables of innovation, environmental hostility and firm size affect to process improvements. A survey was conducted in Purbalingga regency by purposive sampling technique. The samples that are used to data analysing are 110 small medium enterprises. Partial Least Squares method was used to examine 6 (six) research hypotheses. Research instrument validity was measured by convergent validity and discriminant validity. Instrument reliability was measured by conbach's alpha and composite reliability. The result shows that innovation and firm size positively effect to process improvement. Process improvement has a positive effect on firm's growth.