Only
25% of new businesses thrive for 15 years or more, primarily because they lack a few vital aspects, such as funding, a sound business plan, adequate marketing re-sources, and management skills to lead the business leadership team. Nonetheless,
90% of businesses worldwide are small or medium-sized (SMBs), and in developed economies, they account for
two-thirds of total employment and more than half of GDP.
For exactly the same reason that few SMBs survive for more than 15 years, their con-tribution to international exports is relatively small when compared to their contribu-tion to GDP and employment. Resolving those issues could therefore have a massive positive impact on the longevity of SMBs, as well as their impact on the global economy and global trade. Of course, if there was an easy fix, it would have been done by now.
The SMB Challenge
To understand the problem, I want you to imagine that you’re the CEO of a new start up. When you’re a new SMB, the first thing you need to realise is that everything is limited. That may seem obvious, but few truly understand the extent of the issue.
You see, your finances are stretched thin, and you spend a lot of your time trying to secure investor funding. Any profits you generate are quickly re-invested with a view to growing your business as fast as possible, so you can reach a mythical critical mass and become self-sustaining. Your people are stretched thin too. You and the other founders burn the candle at both ends, and every ounce of productivity is squeezed out of your staff. There’s rarely enough money to hire top-notch experts to fill management positions, so you and the other founders are filling those roles. But you’re not an excellent manager. You’re a conceptualist. . You’re full of drive and determination, but you have no idea how to manage a large group of people with ex-pertise outside your realm of understanding. You don’t know how to hire the right people for the tasks you need done. And you certainly don’t know how to look after their mental health. You also have no idea how to manage a business with countless moving parts, though you won’t realize that until you’re already neck deep in it.
Lack of financial and human capital doesn’t just mean you need to grow fast, it also forces you to move your ideas rapidly, evolving from alpha to beta to MVP (mini-mum viable product) as fast as possible, so you can start funding your activities with sales. That means your business is continuously evolving, so there is little point in developing a detailed business plan, let alone hiring an expert to help develop a sound plan. Once things settle down, you’ll get around to that sort of thing.
Lastly, there’s marketing. Unless your business sells marketing services or products, your management team doesn’t have marketing expertise. But you know your busi-ness and the value it can bring to people, so you feel you have enough of a handle on that side of things to be successful, especially if you’ve founded businesses in the past. By the time you realize you don’t have time to market your business effective-ly, whether or not you have the skills, your meagre budget has already been allocated elsewhere, and you’re left scrounging around for more funding to get the word out about your business. So, you look for the cheapest services that will give ‘sufficient’ quality and then you get mediocre results at best.
Instead of investing in quality resources that’ll advertise your business for months or years to come, you pay for ads that will get results immediately, along with quick and dirty content that’ll at least get the word out about your brand. You build a web-site with a few blog posts and believe people will soon flock to it. After all, you’ve got a great product or service that will revolutionize industry, so why wouldn’t peo-ple start flocking to your virtual doors? Your ads get a few people onto your site, but fewer people buy them. .If your site doesn’t show up on Google, invest in SEO. SEO doesn’t cost much and helps you get around in the digital world faster. To get in touch with the right resources, refer to Fiverr and find someone who can help you optimize your site and content for SEO ranking.
Six months later, if you still don’t get any traffic or if sales are low and you’re pan-icking because investors won’t fund your business unless they see sales growth, you should seek someone more experienced to handle your SEO and not take the Fiverr route. Experienced professionals will be more expensive, but get a few quotes and navigate from there. However, if you realize you don’t have the right budget for it, then what?
It’s not hard to see why the vast majority of SMBs eventually flounder and fail!
Most weeks, I get at least one message from a CEO who’s been burned by cheap la-bour or has put the vast majority of their funds into developing their offering. They are left with little money for marketing and are willing to give up equity in their business to ensure they can market it effectively. And I know plenty of expert busi-ness consultants and managers who get similar enquiries from CEOs desperate for that kind of expertise.
How SMBs Can Generate Sustainable Growth
The solution, in most cases, is to slow things down. SMBs need to take the time to develop a great business plan and instead of spending all their money on things that will generate the fastest possible growth, focus on allocating funding in ways that will generate growth that they can actually sustain.
For example, paid ads are a quick way to get the word out about a brand, attract website visitors and generate some sales, but they’re expensive and stop working the moment the ads stop running. It’s a far better strategy to invest in a quality website and the content for a single sales funnel. It may take longer to generate a critical mass of customers, but doing things that way means SMBs can at least start attracting one segment of their ideal customers and then efficiently lead them through the buyer journey to become loyal, paying customers. They can then use the funds from those customers to either run ads to get more people into the funnel or create additional funnels. Once an SMB has a couple of funnels up and running, they often have the funds to hire quality managers. And from there, it’s onwards and upwards!
When SMBs focus on sustainable growth instead of rapid growth at all costs, they’re at a far lower risk of collapse and have a much better chance of growing to the point where they can contemplate international expansion.
But be warned — international expansion is a tricky problem in and of itself. Busi-nesses based in smaller markets tend to anticipate the challenges associated with go-ing global. But I’ve worked with brands that started in the U.S. and wanted to expand into Australia, and they thought it would be smooth-sailing because the U.S. is a much bigger market — surely if they could succeed in the U.S., expanding to a smaller developed country would be easy, they thought.
But that’s not how it works.
Every market is different, and you have to really get to grips with the needs of each specific market before trying to enter it if you want to be successful. For example, Starbucks never gained a foothold in Australia because it failed to understand Aussie tastes. Brands that take the time to properly research their target markets, develop a business plan specifically for their expansion, invest adequate resources in the foun-dations of international expansion and take things slowly are the ones that thrive and generate the most growth in business in the long run.
The Future of Global Trade
SMBs are vital to economic development and stability, but few such brands assemble all four of the critical components of a successful SMB for long enough to make a meaningful contribution to global trade. However, as more resources become availa-ble for SMBs, especially for diverse SMBs, the balance will shift. As brands focus more on sustainable growth, they build a more stable foundation for global trade, and that will lead to an increasing contribution to global markets from SMBs.