Micro, small and medium sized enterprises (MSME’s) are the lifeblood of the world’s economies.
A World Bank Group study suggests there are between 365-445 million MSMEs in emerging markets: 25-30 million are formal SMEs; 55-70 million are formal micro enterprises; and 285-345 million are informal enterprises.
The formal SMEs contribute up to 60% of total employment and up to 40% of national income (GDP) in emerging economies.
In the US there are 30.2 million small enterprises, which comprises a whopping 99.9% of all United States businesses. Employing 58.9 million people, or 47.5% of the country’s total employee workforce.
The bad news is that somewhere around 90% of these businesses fail in the first 10 years. The good news is that more than 15 million will survive.
With some growing into mega corporations employing tens of thousands of people.
The question is … what separates those that survive and thrive from those that slowly die? What makes the difference?
Businesses are started by innovative, risk taking, hard working entrepreneurs.
But then two paths emerge. One going on to success. The other going through the slow, painful phases of death – from enough cash, to barely enough cash and finally running out of cash.
Ones on the successful path share many common characteristics.
Successful small businesses are started for the right reasons. They exist to meet a demand, to serve a market in a different way, to make a difference in the lives of others … not with the sole objective of a way to making money.
The winners accept the pain and stress of starting and growing a business. They have determination and a “never say die” attitude. They prepare for the ups and downs and are not deterred by so called “failures” … knock them down and they bounce back up again!
Focuses (obsesses!) on meeting their customer’s needs. Knowing that their products and services are important ... but their customers are essential. Building relationships by talking to them and, even better, listening to them. Finding ways to grow and nurture their customer base. Growing good customers and culling the bad ones.
The owner has an accountability partner. Someone to talk to who is honest, upfront and tough … who'll confront the painful issues even when the truth hurts. An impartial partner to discuss the business challenges, to ask for advice, bounce ideas off…. and has their back through the exhausting times.
Business people understand that traditional small business accounting … having a set of books … is totally inadequate for running a business. They create a complete, balanced picture of the business and understand what is important.
The successful businesses handle the unavoidable bad break. Driven by their vision they will do anything to make it happen.
And they know that to make it happen they will have to eat frogs ... often! They take action and if this action doesn’t work out as planned, they take another action.
The world is changing far more rapidly than most people are aware.
For a business it’s adapt or die.
Responding to changes that are taking place in in their industry and the world. It’s embedded in the successful business DNA as a way of staying ahead and keeping a competitive advantage.
Business success is bred through being frugal and penny pinching. Carefully considering all purchases, evaluating options and negotiating everything. Having an obsessive focus on cash and profit knowing that big sales numbers are not the key to a sustainable business!
They understand the simple rule that “Things take twice as long and cost twice as much as expected.” So, they prepare an adequate cash runway to start and to sustain the business. Driving the business to make a profit and have a positive cash flow in as short a time as possible.
For the renowned investor Mark Cuban this should be within 60 days for profit and 90 days for cash flow!
They bootstrap knowing that many problems that have a quick fix “throw money at it” solution can be overcome with clever, innovative, low cost, or no cost, solutions.
They are not bedazzled by seeing a large amount of money in their bank account. It doesn’t drive them into a spending frenzy. Only to have to face the inevitable pain as future spending starts to grow faster than income.
Many successful owners are humble and know, and accept, what they don’t know. So they hire good employees. Not anyone; but those with a good attitude and work ethic as well as the needed skills. They know that they cannot do everything themselves and intelligently leverage their time and skills.
As Steve Jobs said, “It doesn't make sense to hire smart people and then tell them what to do, we hire smart people so they can tell us what to do.”
Knowing that the path will be long and hard they reward themselves with small victories. Make enough time to look after the other parts of their life. Their health and wellbeing and relationships knowing that only having lots of money is not a full success package.
Effective businesses develop systems to run their business. They are fixated on small details and passionate about what they do and how they do it. Always wanting to provide a predictable and consistent service.
Successful small business owners are a special breed. Independent, productive, building, motivating, driving providing solutions.
With the world in such an economic upheaval small business are a vital ingredient in building economies. Small business entrepreneurs need to understand the requirements and have all the support they can get to become on of the successful ones.
Passionate about helping small and medium size businesses achieve success - reducing the number of SMB's that fail. Helping SMB owners find their path to financial and personal freedom. Every day a learner and excited by all the opportunities available today.