Sitting in a MSME (Micro Small Medium Enterprise) pondering over this slide on Business Landscape in India - out of 100% - 94% were Micro Enterprise, 5% small, 0.7% Medium & 0.3% Large business. Shocked, right ? But this is brutal fact. Connecting back to my experience of dealing with so many small, medium and large businesses in various segments here are the striking difference that I find between Large & Small/Medium:
1. Weak & distributed financials:
Most Small and Medium business would have created so many different business entities and firms in the name of various family members to save on taxes as advised by their Chartered Accountants. When you take advice only from your tax practitioner or CA they just look at the financials from the tax and compliance angle completely negating the point of business growth and future plans… of course can’t blame them, that's not their job neither their domain expertise. This leads to distributed and weak financials and SME gets stuck when they decide to go for large project or fund raising from financial institutions or competing with giants of the industry or going for a Joint Venture resulting in missed opportunity to leap jump and become big.
Consolidate financials and create balance sheet strength based on the business plan in to single entity that will help you to grow faster and stronger. Few bucks of taxes (if at all ) paid extra won’t matter in the long run compared to the growth opportunities.
2. No investment in talent:
Most SME Entrepreneurs are super executors and hands on doers, that's great, but as you grow you need to get better at thinking and getting things done since you will have limited time bandwidth. Most Entrepreneurs crib about not getting the right talent but when you say that.. also consider the fact that larger companies have grown with the same talents, it's not that you are operating on Earth and they are on the Mars :) so here are the 2 major weakness in SME Entrepreneurs :
a. Your appetite to delegate and
b. Your ability to create more leaders
Appetite to delegate means you delegate not just Responsibility but also give them Authority to take decisions and you should be OK if people make mistakes. You need to have larger tolerance towards failure; also it should be fine if they don’t perform exactly how you would have performed as everyone would have different skills and efficiency. It's fine as far as your work is getting done and they are getting better at it. Some extra cost incurred on delegation is better if it saves your time bandwidth which will have larger value.
Most forward looking SME Entrepreneurs will attend events, workshops, Master classes, Training courses and gain huge exposure while their people are where they are... since they aren’t been sponsored anywhere. Entrepreneurs keep running faster but their people lag behind since they won’t invest in training people creating a huge gap between them and their people. So when you grow you have only One Engine that's yourself and all other Wagons. Now one Engine can pull how many wagons ?
So invest in talent, bring professionals on board, bring smarter people, more experienced and complimenting capabilities on board. May cost you in the beginning but this would become investment giving you multiples of growth.
3. Start multiple business:
Most SME Entrepreneurs, when they taste some success in one business, start investing in 2nd business then the 3rd one and cycle goes on. They spread themselves thin rather then going deep in their first business. How many of them just cut across, penetrate and create a really large business before diversification, handful of them. There could be various avenues in your business but most times they start feeling that other business are much more promising, remember grass is always green on the other side :) So focus, focus and focus on your business to go deep till you have exhausted all the avenues to make your current business Big.
4. Absence of Professional advisors & decision making board :
SME Entrepreneurs are always good at creating a transactional relationship but I see hardly any investment when it comes to hiring professionals and board of advisors. Other day I had sent a proposal to a SME client they liked our Business Plan Bootcamp product but they asked what do you deliver? I said Clarity in your Business Plan and he was wondering what was that ? Until they went through our bootcamp and saw business really grown quarter on quarter they didn’t know advices are so much valuable rather they didn’t know advisory service has a price :)
Second very important thing is don’t decide alone and jump into it just because you are the Promoter and the ultimate boss, create processes and structures around decision making, create a board of advisors who are independent and capable thinkers and connected to your business, have regular structured business meetings to discuss any new plans, projects before jumping into it. Participative decision making will save you from making mistakes and de-risk the business.
Invest in Professionals, Advisors and decision making boards, they will help you to scale better with may be lesser shocks. If you are proud wearing that SME badge then dump this piece of article else get cracking towards making it Big.