CAPE TOWN - Small and medium sized enterprises face the grave challenge of surviving the economic climate. Lulalend provides the basic do-or-die priorities for SME survival over 6 months.
CEO Trevor Gosling of small business funding company, Lulalend says that between 70-80% of SMEs fail within the first five years. He adds that a harrowing 1% of SMEs grow to employ more than 10 people.
Gosling says that South African SMEs struggle to grasp their own growth potential and to become active drivers of job creation.
The national budget shortfall of R209 billion coupled by slow economic growth and political uncertainty means that SMEs seeking much-needed funding face a resilient time ahead.
Citing African Bank’s crisis a few years ago due to non-payment of unsecured loans by its customer base, Gosling says that traditional lenders have also lost their appetite for exposure to unsecured lending.
In the instance where such offers arise, there are horrendous red tape accompanied by this, says Gosling.
Consequently, majority of SMEs have faced the punt.
According to Lulalend’s latest survey of South African SME’s, 76% of respondents said that they suffered through tedious paperwork and had their applications for funding rejected.
The #1 priority for SME success
“I believe access to adequate and flexible funding is the number one priority for South African SMEs over the next six months. The results from our survey showed that access to credit is the single biggest business challenge South African SMEs face today, with a further 33% listing cash flow management as a primary challenge”, says Gosling.
The banks and lenders do not only play a role in ensuring SME survival.
Gosling says that SME owners also need to play a more active role in ensuring their businesses are resilient enough to withstand times of hardship.
SMEs should focus on accounting and administrative processes.
Successful entrepreneurs are able to take calculated risks to accelerate growth and expand into new markets. However, they should understand the state of their businesses.
Technology as enabler
Technology can provide administrative and operational support to SMEs. Gosling adds that simple tools such as Excel could provide SME owners with great insight into their business.
Similarly, online accounting software such as Xero gives SME authority over their finances. It also enables business owners to plan more effectively.
Gosling adds that given the current volatile economy, a slight advantage could be the difference between success and failure, survival or bankruptcy.
SMEs should prioritise marketing their business effectively.
“47% of respondents in our survey listed marketing as the biggest potential factor in growing sales and revenue, and yet only a third had a marketing budget”, says Gosling.
Platforms such as Google AdWords, social media profiles, LinkedIn groups, and a basic website not only increases the SME's exposure in the market, but also gives potential lenders comfort that the business is well-supported and in a healthy state declares Gosling.
Partner, and partner well
Partners play an integral role in supporting and driving business growth in the SME sector.
An equity partner or a business partner that provides goods and services are complementary to an SMEs long-term business sustainability.
“In our current economic climate, a go-it-alone, shoot-from-the-hip approach is a recipe for disaster. SME owners should prioritise gaining access to funding, improving their financial and administrative processes, expand their marketing efforts, and seek appropriate partnerships to ensure they continue to survive and thrive”, concludes Gosling.