Current challenges for SMEs around the world and mistakes being made

Read about a recent radio interview with Michael by Chris Cooper on radio VoiceAmerica

In a recent interview with Chris Cooper on VoiceAmerica Radio’s Business Channel, I was asked questions for an hour about the current issues facing my SME clients in the current tough economic climate. Asked about the challenges my clients are facing, I summed this up as relating to four key areas:-

1. Uncertainty

Everyone hates uncertainty because it spawns a lack of confidence, and people avoid spending money.This has a knock on effect, because they avoid investing in new equipment , new people , new processes and development.Everyone lives for the short term, preferring to live hand to mouth rather than taking a longer term perspective.

2. Funding for the future

Similarly, the banks hate uncertainty and, despite what they say to the contrary, they are only lending to low risk ventures, and even then – sparingly.This is understandable as they are required by the government to strengthen their Balance Sheets, but does not offer SMEs a lot of hope about being able to be confident about banks continuing to support them in the future eg if they take a hit from a bad debt caused by an event that was outside their control

3. Sales, with competitors reducing prices

There is a big challenge about sales, with too many competitors feeling forced to compete on price, while they chase turnover rather than profit.Everyone knows that this is a mugs game, but it is very rife, and it takes a tough entrepreneur to avoid being sucked into giving away their profit and responding to this challenge

4. Differentiation 

Part of the reason for finding it hard to resist the temptation to reduce prices and chasing turnover, is the difficulty many businesses have in differentiating themselves from their competitors.They need to be able to differentiate by offering more perceived value, and then they have a chance to preserve their margins.My challenge to these businesses is to be MAD not SAD – to be Magnificent and Dazzling instead of Satisfactory and Dull like so many of their competitors, reminding them of  a great motto he borrows from entrepreneur Steve Pipe “If you want people to talk about you, you must give them something to talk about”

5. Lack of Vision

Always looking to under-promise and over deliver, I added a fifth element about the Lack of Vision in so many  businesses. In my experience, I find that so many businesses had a vision briefly when they started, but the owners and managers soon forget this as they get sucked into what Michael Gerber calls “The Tyranny of Routine” and what I call “The comfort zone of Activity”Without a clear vision, these business owners end up asking the wrong questions so they keep ending up with the wrong answers.I call this the “Ben Hur syndrome” and I will cover this in another blog shortly

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