a business strategist and coach, I get to meet and work with hundreds of
entrepreneurs. Some of these businesses succeed, but unfortunately a great
majority fail. Too few of these businesses deliver true economic value, become
sustainable or create meaningful jobs.
Over the 12-years of working with SMEs and large businesses that support SMEs, through what we know as supplier and enterprise development (SED), my team and I have identified the following five things that successful SMEs have in place. These five tactics are what procurement, supply-chain management and supplier development practitioners at all levels can do to help speed up the growth of SMEs.
Tactic #1: Establish product-market fit
The purpose of a business is to find, sell to, and to keep customers. The way customers find, buy, and use products and services has evolved significantly over the last decade. The culture of instant gratification, on-demand delivery, the subscription economy, product and service personalisation, and stiff global competition, forces businesses, especially SMEs, to provide compelling value for customers to warrant sales. And for these SMEs to provide compelling value and have a chance in the marketplace, they have to achieve what we call product-market fit (PMF).
Marc Andreessen, the American entrepreneur and investor, defined the term as “being in a good market with a product that can satisfy that market”. However, the definition I prefer is this: A company has PMF when it offers a unique product or service that a great market desperately wants and is willing to pay for it.
Nokia, Blockbuster and Kodak, are perfect examples of companies that were successful at one point but ended failing because they no longer had PMF.
On a positive note, here are South African SME success stories that have reached PMF and have seen some significant growth over the last few years: Bos Iced Tea has grown from zero to R100-million in under 10 years; Sorbet is a flourishing franchise with a R500-million annual turnover; GetSmarter generated R128-million; Yoco started in 2015, and in 2018 they raised R248-million in Series B Funding.
Yes, they are SMEs. In my book, as long as the company is under R1-billion, it’s still an SME. The point is, they reached PMF.
Tactic #2: Innovate a scalable business model
A business model is like a blueprint that defines how a company provides its products and services (value proposition) in a way that is easy to buy, makes the customers happy and keeps them coming back for more. In essence, a business model shows the logic of how a company intends to make money.
Unfortunately, most SMEs only have a product or service. But not a scalable business model through which they can provide that product or service in a way that is profitable, scalable and sustainable in the long run. And this is where enterprise and supplier development (ESD) plays a critical role. That is, to mentor, coach and support the SME to innovate a scalable business model.
Sometimes what inhibits this from happening, is that ESD beneficiaries’ business models are forced and shaped around the one or two major ESD principals/sponsors they supply. This results in the SMEs business model fitting perfectly around one or two clients, but is, therefore, not scalable.
An example of the difference in business models is the mom-and-pop florist vs Netflorist. One is a traditional small retail shop, while the other, Netflorist, is a massively scalable business that uses technology at its core to provide a service (in the form of sale and delivery of flowers, gifting and other products) through its scalable ecommerce infrastructure. Same product, but very different business models.
Large companies that support SMEs through ESD need to find smart ways of investing in an SMEs scalable business model, and not one that selfishly fits into theirs.
Tactic #3: Build an automated sales and
The majority of SMEs miss their revenue targets. This is primarily because the sales function has changed over the past decade. Yet SMEs still use outdated methods of marketing and selling.
are some stats that speak to how sales has changed, and therefore the
challenges SMEs face when it comes to generating leads and ultimately closing
sales opportunities: B2B clients are
65-90% of the way through the purchase decision process before they contact a
supplier. (Forrester); 81%
of sales happen after seven or more contacts with the prospect; on average, 50%
of the leads in any system are not yet ready to buy. (Marketo); almost 80% of
new leads never become sales (MarketingSherpa).
Therefore, to help an SME reach its revenue targets, ESD principals and sponsors can help SMEs to automate their sales and marketing strategies. They can achieve this through the use of customer relationship management (CRM) and marketing automation systems. These will help SMEs to generate a greater number of leads, but also to nurture and close those leads. This will result in higher revenues generated.
Tactic #4: Implement business processes
ability of a business to scale and grow, largely depends on its ability to
implement repeatable business processes. However, the reality of most SMEs is
that they lack the competency, the resources and the cash flow they need to
implement business processes.
Business processes ensure the business is process dependent. A business is process dependent when all business activities happen consistently, as they should, whether the business owner is present or not.
When an SME is process dependent, it will be able to consistently generate and convert leads into paying customers; fulfil and deliver its promises to customers, invoice and collect payment; and hire, train and keep the best employees it needs to grow
Supporting an SME to implement repeatable and effective business process will significantly increase its ability to deliver great quality products and services as well as increase the probability of growth and sustainability.
Tactic #5: Hire a high-performance team
build a high-performance team, the entrepreneurs need to develop leadership
skills. Yet most small business entrepreneurs are technicians who are experts
at their products and services, but not experts at managing a business or
people. And a big part of managing a business is hiring and managing great
teams. But without the competencies and resources, small business owners are
facing the danger of being trapped in their own business and unable to find
capable staff they can hand additional responsibilities to in order to unlock
ESD initiatives can support, mentor and coach small business owners on becoming better business managers and leaders of high-performance teams. This, in turn, creates the jobs that’ll help entrepreneurs further grow their businesses as well as the jobs the country so desperately needs.
Article originally appeared in Bespoke: http://www.bespoke.co.za/index.php/articles/382232-help-accelerate-the-growth-of-an-sme-by-kk-diaz
Contributed by: KK Diaz, a business strategist, coach, author and SME growth accelerator