Company Announcement - The South African government has often mentioned that future economic growth will be driven by small- to medium- sized enterprise development. The government has backed this statement through the establishment of the Ministry of Small Business Development in early 2014. Prior to its establishment, small business development was overseen by the department of Trade and Industry.

Despite this positive, a lot needs still to be done to drive small- and medium-sized enterprise development over the next five to ten years. Chief among the challenges that small- to medium-sized enterprises are likely to encounter during their formation and progression is sufficient advisory support. If small- to medium-sized enterprises are to be compared to the larger corporates from a structure perspective, an aspect that is often lacking is a dedicated research and strategy function. Due to limited financial resources, start-up businesses do not have the financial muscle to employ a dedicated strategy resource. This function is often left to the entrepreneur and whatever staff he/she has employed to support his/her entrepreneurial endeavour.

In an increasingly complex and uncertain business world, a dedicated research and strategy team is one of the strategies that most of the big corporates have adopted to reduce respective business risks. These individuals are employed to question on an on-going basis whether the company is in the right business and if it is in the right business, how it should differentiate and position itself to maintain a competitive edge. In addition to the dedicated team, the larger corporates will from time to time employ external consultants to guide some of their existing and intended business decisions. The external consultants are engaged to provide a second and in other cases third opinion on whether the company’s corporate and business strategies align with its objectives and reason for existence. Even if some of the obtained counsel is wrong, the engagement with management consultants often brings new ideas into the business that are worth considering from a business continuity perspective.

If management consultants are a key contributor to the larger business corporates way of doing things, I posit that small- to medium-sized corporates also need strategic support to better their odds from a business success and longevity point of view. I also posit that due to the existing failure rate of small- to medium-sized enterprises (nine out of ten businesses failing during their first five years of existence), the small- to medium-sized start-ups need more strategic and financial support than the larger corporates. If this is the case, one wonders why the leading management consulting companies are engaging the aforementioned enterprises to help them to navigate through this often tough and challenging business environment.

The first thing that comes to mind is cost. Most small- to medium-sized start-ups are boot strapped, that is, funded from the entrepreneur’s own pocket. With the entrepreneur spending all they own on setting up the business, they are limited from a resourcing point of view to engage management consultants to guide the evolution of their respective businesses. Due to most management consultants working with larger corporates, the top-tier consultants cost a premium to engage, further limiting the chances of them being engaged by small- to medium-sized start-ups. This places them in a bit of a pickle, leaving the daunting responsibility of progressing the business strategically to the entrepreneur.

In addition to the above, I also suggest that small- to medium-sized enterprises battle with being financial sound, sometimes spending more than they are earning (driven by entrepreneurial ambition, financial mismanagement and bad investments; to name a few). Larger corporates again, employ a dedicated finance team to handle their finances, including a fair assessment of whether the company is over and undertaxed and whether other corporate investments are earning a viable return. Such an approach would also be of immense benefit to the small- to medium-sized enterprises. Financial consulting services could go a long way in supporting the small- to medium-sized enterprises to make prudent financial decisions that sustain their long-term success.

So long story short, I posit that financial and strategy advisory support is crucial for small- to medium sized enterprise development and long-term success. Consultants should find a creative and innovative way to engage and serve this growing customer base. Payment models for services rendered should be cognisant of the fact that these entities are cash strapped based on them bootstrapping most of their entrepreneurial endeavours. If these concerns are to thrive, partnerships should be established that are focused on understanding their needs and developing tools and approaches that are both viable for the respective parties. Small- to medium-sized enterprises could be the very solution that could help South Africa and the sub-region to address long-term unemployment. Effective support is an aspect needed to evolve the sector progressively.