Article: Breaking the scaling-up barrier in SMEs

Culture

Breaking the scaling-up barrier in SMEs

What would it take for SMEs to go past the obvious challenges and emerge victorious by breaking through the scaling up barrier?
Breaking the scaling-up barrier in SMEs

For any enterprise big or small, growth is the ultimate goal. But most often than not, growth proves to be an elusive goal to achieve. Even though every business organization has to go through growth-pangs at some time, the situation is often rather intense for SMEs as compared to larger organizations.

Small and medium-scale enterprises contribute significantly to any local and national economy. According to an ILO study, they are among the biggest job creators in the developing world. These statistics are encouraging, however, the other fact remains intact as well - SMEs face a lot of challenges in scaling up. But traditional wisdom would have us believe that every challenge is an opportunity in disguise. So what would it take for SMEs to go past the obvious challenges and emerge victorious by breaking through the scaling up barrier? Let’s start with identifying the challenges first and figure out possible solutions for them.

Insufficient planning

Winston Churchill once said, “Failing to plan is planning to fail”. Most SME entrepreneurs start experiencing troubles quite early on in their journey because they often fail to plan adequately. And the solution to this problem is very obvious and very simple - start with a plan. Planning gives you three very distinct advantages which you don’t get in the absence of a plan.

  • You will set business objectives, and are likely to achieve at least some of those objectives. When you do, you will have something to show for. Those achievements, however small they may be, will act as an encouragement for you and your team to go further and achieve the rest of the targets set in that plan.
  • Competition isn’t going away. A plan will help you set a long-term objective for your business and enable you to look past the competition to achieve that target, no matter what comes in your way.
  • Most importantly, a plan will help you identify any inconsistency in your operations that need addressing, like cash flows, or human resources, to ensure continued growth.


Insufficient management skills

The first big challenge that SMEs face is that of insufficient management skills in the top leadership. Usually, it is seen that SME leaders lack at least one of the critical skills to manage a business. It could be finance, marketing, human resources, supply chain, information management (what is and what isn’t working) or other such critical business functions. Insufficient capital also plays a role in exasperating the situation as SMEs find themselves unprepared to hire people with necessary skills to fill the obvious gaps.

The quickest solution for such an event is to first identify the weakness and devising a plan to address it. Most often, these weaknesses need only a little time and effort along with some money. Reassigning one of the managers to offer a second opinion on proceedings and watching out for obvious mistakes, or hiring a part-time consultant are enough to counter these shortcomings.

Insufficient cash flows

Cash flow is critical to any business, and the absence of robust cash flow management, including raising more capital through debt and other instruments can hinder growth for even the most resilient organizations. The situation can get worse for businesses that need capital goods to ensure smooth operating cycles for the business.

The solution, however, is easier than business leaders trapped in such a situation realize. All that entrepreneurs need to do is start with a cash flow plan. It will allow them to better judge cash needs of their business before they arise and manage those needs accordingly.

Divided focus and poor procedures

Entrepreneurs often face the challenge to stay focused on the goal. Many things contribute to that, like a resource crunch, finances, operations etc. that often result in poor business procedures. This, in turn, adds to troubles of the entrepreneurs by diverting their focus to the problem rather than the solution.

The solution lies in the planning phase. Clearly defined long-term goals can help addressing any resource crunch, sometimes even before it arises and enable entrepreneurs to maintain their undivided focus on the opportunities and procedures that are needed to ensure success of the organization.

Risk assessment and alternatives

Risks are an integral part of business, and ignoring them does not make them go away. They can’t be avoided, but entrepreneurs can definitely learn to manage them properly. In fact, calculated risks when managed properly can act as a boon for growth of SMEs. 

The solution is as simple as constantly reviewing the course of action to determine steps and procedures that can help minimize an adverse impact of risk and increase chances of success. Maintaining a journal that offers a chance of retrospective analysis and a second opinion from a mentor or expert is also a good idea for entrepreneurs.

In conclusion, SMEs have been contributing aggressively to the economy, be it job creation, their contributions in GDP, or even innovation in products and services across the globe. In spite of that, these SMEs often face challenges in a disproportionate manner compared to larger organizations. But the good things is that these challenges are not always roadblocks, but often opportunities that the entrepreneurs need to avail by taking a closer look at them. Addressing these challenges, then, would not be a problem, and can help SMEs break through the barrier of scaling-up to achieve success.

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Topics: Culture, Talent Management, #SMETalent

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