SME Survey 2007 sponsored by Standard Bank and Fujitsu Siemens Computers has uncovered some interesting trends. Amongst those is that small business owners are not aggressively pursuing avenues to grow their market share and stay ahead of the competitors, but rather tend to focus more on operational matters.
A concerning find that emerged from the results of the survey indicated that the most worrying issue for the small business owner is crime, followed by cash flow-related issues. In an attempt to find solutions to the problems that plague small business owners, they invariably turn to accountants or bank personnel for advice. While very few business owners use specialist mentors, those that do report feeling more confident about their business and have a more competitive focus.
According to Arthur Goldstuck, principal researcher of the survey, it is primarily crime that keeps the SME business owner tossing and turning at night. "That 27% cited crime as the most worrying factor came as something of a surprise," he says. Less surprising, however, was cash flow at 19% and the related issue of debtors next at 13%. "This was out of a 'laundry list' of woes that included options such as traffic and the threat of competition," Goldstuck says.
He says that with competition ranked fourth in the list - only 12% of respondents were deeply worried about what their rivals were up to - he believes most SMEs are not benchmarking themselves against others. "When competition keeps you awake, you are concerned about market share. This does not seem to be a focus for South African entrepreneurs, and tends to be a bigger factor in the corporate environment."
Melt van der Spuy, director of business banking at Standard Bank, says this finding demonstrates that the average SME owner is concerned about money and margin, return on equity and the future. "Most salaried people do not have these concerns as they have predictability of income and assurance of pension funds or other such structures," he says. "These are questions of operational efficiency; while essential, this focus must be balanced with due attention to strategic development of the business."
Van der Spuy believes the tendency to obsess around operational issues may be a limiting factor for the growth of the business and even a possible contributor to the high rate of failure for new businesses.
"This is both the scourge and the beauty of the smaller business. If you do not worry about cash flow, who will? It is a function of that which is most pressing to the business, but this has to be balanced with tactical insight and direction," he states.
In terms of the avenues which SME owners look to for business advice, Goldstuck says the accountant is turned to by 72% of respondents, with the bank second at 59% followed by legal advisors at 53% with just 33% of SMEs relying on business consultants. "What is of particular interest," he says, "is that those companies which make use of mentoring or coaching are in the minority (9%), yet this is the biggest differentiator in this category in terms of high levels of competitiveness. 50% of those using these services regard themselves as highly competitive versus 41% of the rest, so it appears that such services are highly advantageous."
Van der Spuy believes the accountant is a good choice for independent business advice. "Whilst the business owner can turn to the bank for advice, the accountant is likely to have the clearest picture of that particular business, certainly from a financial point of view," he says.
In terms of mentoring, van der Spuy is a firm believer in the value of such services. "A mentor can add the same value as a non-executive director does to a corporate, by providing independent advice and guidance. However, mentoring is not well understood or trusted amongst small business owners. In addition, the costs associated with finding the right coach can be a challenge for the owner," he adds.
The findings did show that some positive gains have been made in certain areas and one such area is the level of government support. Goldstuck says it is very encouraging to see the significant growth in satisfaction with government support. "This metric was first tested in 2004, with just 12% of respondents indicating satisfaction. This has grown to 34%, a dramatic turnaround which shows that while there is yet work to be done, government is moving in the right direction to support the emergence of entrepreneurial businesses."