5 MASSIVE Reasons SMEs Fail
Implementing actionable and realistic business plans can increase the lifespan of any SME.
According to business strategists, the survival of new companies depends on some essential factors. It’s easy for these experts to predict the outcome of any business during their teething periods. Don’t forget that developed countries rely on the SME business sector to reduce unemployment rates. Without a viable small and medium business sector, the size of an economy might shrink. In this article, we shall analyze the cause of SMEs’ failures and suggest ways to prevent a disaster.
Failure to Plan
While listening to the challenges and success stories of many entrepreneurs, I could identify a common factor for their growth. They developed realistic business plans that were guided with the growth mindset. Planning and implementation are different, but both phases require unique strategies. Without conducting an accurate market survey, there will be no information to plan the business. Being a small business idea doesn’t reduce the risk of failure. Instead, the correct implementation of a viable business plan must include some of these factors:
- Highlight the mission and vision of your SME business.
- Develop financial, sales and marketing strategies
- Monitor competitors’ activities, and grab a market share
- Conduct market surveys, and be active in your business niche
- Forecasts your revenue, prepare budgets, balance sheet, and reduce expenditure
- Identifying your competitor’s plans by speaking with them at networking events
Too Much Focus on Accelerated Growth
Learning from mistakes is more important than focusing on accelerated business growth. According to management accountants, every new business has a break-even period. It’s the phase where the revenue is more significant than your business’ running costs and loans. By trying to grow too fast, an SME business owner might be consumed by unnecessary risks. However, numbers don’t tell lies, and the company’s financial statement often indicates its performance.
One of the advantages of entrepreneurship is learning to improve your business from every experience. Growth often takes time, and it’s realistic to accomplish your corporate targets without using shortcuts.
Incompetent Management
Usually, the board of directors applies their wealth of experience to the growth of companies. They make realistic projections, develop strategies and plan the smooth running of most organizations. When SMEs fail, the first area that consultants probe is the management style. Without purposeful management and leadership, the organization will fall short of its key deliverables.
Even smart people with natural leadership skills try to develop their ideas. Also, employees will suffer from poor morale if their organization has an ineffective management culture. This condition often affects the productivity of SME businesses and leads to business failure. Additionally, reckless financial strategies and the lack of technological tools in the workplace are some elements of incompetent management.
A Poor Bookkeeping Culture
Many business experts understand the importance of using accounting software. You could experience a plethora of fraudulent transactions without proper accounting procedures. Usually, SMEs businesses thrive when the owners track financial activities and reduce wastefulness. The process of selling your products and services should be executed with less human interferences.
As a business analyst, I recommend cloud-based accounting tools for start-ups and existing businesses. With these accounting software applications, entrepreneurs can track financial activities without going to their offices.
Too Much Account Receivables
Offering your products and services on credit terms is not the right way to attract customers. Also, this practice is a weak organization culture for new businesses and SMEs. Usually, clients take undue advantages of companies that depend on credit terms. When your profit and loss statements show more account receivable, it indicates a journey of business failure. It’s better to negotiate favourable terms like upfront payments and bank guarantees when dealing with clients.
Venue Type For Client Meetings
Providing a good venue in meeting a client helps in establishing a good impression and reputation. But what is the ideal one to casually meet a client in to catch up? A formal or an informal one? Perhaps, the best way to know is to be aware first, about the difference between a formal meeting and an informal one.
A formal meeting has a set agenda and the minutes of the meeting had to be documented. Examples are board or conference meetings, informal venues, special task forces, committees, and communities. The ones that attend it usually have defined roles that follow a hierarchy and are more likely to be representing companies and organizations. Note, if your team or client is about to undergo a training session like an organizational development certification then you need to formalise the meeting in advance.
On the other hand, informal meetings happen as it gets organized on a day-to-day basis. Brainstorming sessions and progress reporting fall into this kind. Informal meetings require an agenda. But mostly, to keep everyone focused. It keeps them on track so that they won’t get derailed from the purpose of the meeting. Minutes are not legally required but it’s always advisable. And if they were taken down, it’s just to know what was tackled as a pointer for the next meeting to take lead from.
When it comes to informal meetings’ minutes, such as one-on-one coaching and mentoring information chats, they are more lenient and do not require formal use of language and sequence. No formal votes needed therefore, no need for structured decision-making. This is not a license for informal meetings to lose their structure altogether. They also most certainly aren’t free for all to attend.
Now that we have clearly defined each, it’s safe to assume that it’s common that informal meetings will take place in an informal venue. But just in case you have to decide which is best for your casual client catch up, here are some factors you must consider in deciding which:
Agenda
What is the casual meet-up for? Is it just to exchange views on some progress in the project to be done? Is a signature or two needed to finalize contracts? Is it for tripping to a property for sale? Or to get feedback from the product bought from you or the service rendered by you? Having an agenda is one of the most ultimate factors one must consider to identify how casual a meetup could be.
There are casual meetups that are full of idea generation. But there are casual meetups that create just as how Steve Jobs initially met up with his friends at the garage as they worked on the first Apple computer. But since that was the most conducive at that time, and all they needed was a workshop where they could all work together regardless of the location.
Time
Casual meetups or informal meetings follow an agenda, but it’s more laidback and relaxed. It doesn’t have a set time to finish. Its minutes are not taken down strictly. Although casual meetups usually need little time only, it all depends on how much of exchange is needed in terms of views, opinions, suggestions, and agreements. It’s advisable that the longer you expect a casual meeting would last, the more it needs a formal venue because a coffee shop may not be too ideal for long meetings. Many things are discussed during informal meetings. The client is encouraged to speak up more and discuss anything that’s not usually discussed in a formal meeting.
People
Informal meetings usually involve not more than 5 people. If it is too large than that, it may need its own boardroom. As an informal venue somehow releases the client from anything tense, they feel encouraged to share their views and opinion. An informal venue provides a less threatening ambience for the client that enables it to express more of itself making the rapport you build even sturdier.
Informal meetings or casual meetups come in many forms. Examples are ones that are done in ad hoc, impromptu, or last minute. There are no minutes taker, manager or chairperson and a strict agenda. Some clients prefer a formal venue over an informal one even though it’s a client catch up meeting only. Represent yourself well by consulting this list to help you gauge what is the most appropriate for your client.