Small and Medium Enterprise (SME) businesses contribute over 70
per cent to the Kenyan GDP and taxes. Without them, we would be in
trouble as an economy. Why is it then that the largest producer of jobs,
taxes and GDP are the ones who find it hardest to grow?
Most
SMEs collapse before their 5th birthday. Growing a business is no easy
feat and no two businesses are the same. There are of course the obvious
external factors such as taxes, market size, competition and demand.
There
are consistent reasons why businesses struggle and which I will share
with you. If you are facing some of these challenges and really want to
grow your SME business, consider these points as a priority.
1. Business owner error
One of the major reasons why so many SME businesses fail to grow
is that owner/founder needs to wear too many hats and be responsible
for all aspects of the business operations.
The
owner/CEO tends to concentrate on the things they like to do rather than
prioritise the critical drivers for the business. Regularly as the
owner knows they are not an expert, some areas of the business are
simply left untouched until it is often too late.
2. Growth strategies & infrastructure
Most
owners and managers lack clarity on where their businesses are at and
more importantly where they are going. They don’t have clearly defined
growth strategies, or clear business and revenue models.
Without
the right infrastructure in place, such as the right systems,
procedures, processes, controls and overall quality in the business, it
will stand still.
3. Lack of investment
Whether
it’s for new technology, larger office space, more employees or
equipment, growing companies require investment to really grow.
Many
owners don’t know how to go about finding investment for their
business. It may require borrowing money, finding strategic investors or
spending profits. Either way, unless you invest in your business your
ability to grow will grind to a halt.
4. Hiring the wrong people or refusing to hire at all
The
right talent is paramount to the growth and success of any business.
You cannot build a great company without great people. Hiring the wrong
people can be expensive and seriously impact the rate of growth of the
business.
“Saving money” by not hiring or outsourcing
is another common mistake. This means the company is under-resourced and
the talent you do have will leave as they cannot handle the pressure.
Bring in the professionals to allow the business to grow.
5. Poor management skills
Inexperienced
or unskilled leaders will find it difficult to retain the best talent.
They will find it hard to truly motivate their team and bring out the
best in them. An uninspired team will underperform and adversely impact
your bottom line.
Retention
of key staff is vital for any business to survive. Nairobi’s Gikomba
market has multi-million shilling SME business operating there, but due
to lack of good leadership they never grow to big corporates.
6. Create Fans not customers
The
very best businesses continue to delight their customers with new
products and services and provide top notch customer services.
This
makes their customers huge fans; encouraging loyalty. Without excellent
customer service and innovation any business will find it difficult to
keep their repeat customers.
7. Technology and systems
Many
SME businesses fail to invest in technology making it difficult to run
an office and have instant access to much needed information. They piece
technology together as they go, wondering why it cannot cope when they
scale up.
This leads to a lack of real-time business
information such as a sales, leads pipeline, customers’ details and have
little or no visibility on their finances. No supportive backend means
soon it is impossible to manage any version of the front end.
8. Consistent targeted marketing
Many
business owners don’t really understand marketing and its importance to
their business. They’re not clear on their brand, brand values or their
target audience making it difficult to engage the customer and
laser-target marketing initiatives to speak to them directly.
Bad
marketing means the business will struggle to build a consistent sales
pipeline. Inconsistent sales means a strain on cash flow and this throws
the ability to survive into doubt.
Doing the same
thing expecting a different result. Whether you are talking about
products or services the market is always changing, and products and
services have to change with it.
You have to
consistently innovate, trying new things and ensure you don’t fall into
habits that will take you away from your current core drivers.
9. Living too close to the line
Many
companies struggle as their expenses seem to increase at a similar
level to their sales. Further, there are many businesses operating on a
margin of less than 10 per cent.
It is very easy for that profit to be eroded with only one big invoice or unexpected event.
Developing
clear lean processes and managing costs carefully, with proper
forecasting expense model is vital. This will allow business leaders to
make better more informed decisions.
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