SME and Me!

Post Pre-Script:
Ever since i started blogging, one of my close friends (who is a director in a big 4 audit firm) has been urging to engage myself into technical writing. I have been reluctant. This one is for his encouragement, though I am not sure if this would qualify to be called a "technical blog"!

Small and Medium Enterprises (SME)

I have been engaging with SME's, close to a decade now in various capacities -in the initial years as a banker to SME's, managing their credit requirements and now as a consultant and adviser, helping SME's improve their profitability. One behavioral trait that i have seen with most of them, if not all, is that the majority of a SME entrepreneur's time is spent on non-core issues. Pareto!

If you wiki on Vilfredo Pareto, you would notice that he was an engineer, a sociologist, a political scientist, an economist and a philisopher! His famous 80-20 rule is so much spoken today and as an ode to this great man, i can be sure that "80% (or more) of anything written or spoken about, has a reference to Pareto". One of my HR friends says that we should erect a statue of Pareto in Marina beach (and he says so, not in a lighter vein).

A SME entrepreneur wishes to spend his time on the following:

• Innovation - product and process
• Enhancing capabilities - Physical plant capacity, employee capabilities, technical improvement etc
• Enriching customer experience
• Expansion - Every SME entrepreneur at all points of time has an "upcoming" expansion plan - could be geographical or across businesses. There is no dearth of ambitions.

However if you carefully map his actual time spent, it would be:

• Managing finance- Count the number of visits and discussions that he/ she has every week with the banker(s).
• Battling manpower issues- There is a gap between the time a SME entrepreneur starts seeking the most appropriate person for the job and the time he/she compromises and settles for the actual available candidate (I am not being sarcastic and i am just putting down the sad reality). He/she is also plagued with a lot of attrition - most of the employees do not spend a notice period (actually abscond), leaving the SME with an unexpected vacancy.
• Compliance with business laws
• Managing consultants - Practically everything in a SME is outsourced!

Amidst all this, a SME entrepreneur is a super enthusiastic guy who keeps running with his vision intact of making it big! I always think that large corporates do not have as much risk-taking abilities as that of a SME entrepreneur. A large corporate would sit on huge piles of cash and keep looking for risk to be lowered in a particular geography, while a SME entrepreneur would risk all his personal assets in a ruffled market.

In this race that he/she keeps running, they build certain misconceptions - Two of them adds to the trouble  - they perceive that a higher capacity utilisation of the factory line is a healthy sign and money in the bank account is a healthy financial position. They keep borrowing from every credit source and try to run the factory 24/7 and expect a fat bank balance. And when it does not happen, fire-fight to manage recurring payments. Moreover they are never in a position to say "no" to their customers. Their wishlist of spending time on products, processes and customers are intact - however a SME, in more than one way would fall under Pareto's the law of vital few!

There are a few questions that i ask an entrepreneur, (which mostly becomes the task of my job):

• Are all products manufactured / service provided profitable? Do we know the profitable ones?
• Do happy and satisfied customers automatically mean profitable customers?
• Do you know the actual cost of a product / service? (not the anticipated cost and not a periodic total)
• Are expansion plans financed completely from long term sources?
• Are you spending too much time on preparing MIS?
• Are you taking decisions based on MIS reports? (I know organisations that take 10 working days to prepare MIS and spend 45 minutes to discuss them - that too on the veracity of the numbers)

By asking questions (to themselves), I believe a SME can significantly improve their performance. Most of the answers are within the grab of a SME and successful SMEs who transcend to a large corporate are those who fought their way to find answers to these difficult questions. By drawing inspiration from Pareto, philosophically, all human progress has come from asking and answering questions. So ask.......what say?