Small and medium enterprises (SMEs) remain the backbone of our economy. When large businesses cannot satisfy growing demand, SMEs take up the slack, meeting the needs of the consumer. Given that the decision-making process in SMEs can be almost instant, they have a greater ability to react to changes in the economic climate than do big businesses, which are often saddled with red tape and complex decision-making processes. Despite their unique advantages, most SMEs aspire to expand, to become larger organisations and to become more profitable by exploiting economies of scale. Some industry experts believe that T&T is not, in fact, host to any large businesses, going by international standards. But there are a few SMEs that have enjoyed substantial growth and been able to take their products and services abroad into markets once impossible to access based on their original size. They've faced significant challenges along the way, including financing, manufacturing, diversification, distribution, staffing and technology.
Financing: Perhaps the biggest constraint on organisational growth for SMEs is the difficulty they face in accessing low-cost finance. Many small businesses lack capital to be used for collateral and, thus, cannot access the affordable financing they need for expansion. Commercial banks often view small business as risk, since an SME's asset value is almost never able to securitise the value of the loan. However, many small businesses continue to grow. How? Traditional lending institutions, like credit unions, have always been noticeably supportive of SMEs and government subsidies and structural support from establishments like National Entrepreneurship Development Company Ltd and Business Development Company funded many small enterprises in times when they failed miserably to compete with larger businesses for available funds.
Market share, diversification: Making the transition from small to big is not just about securing capital. SMEs must also assess consumers needs and identify areas where there is room for growth. Where needs are identified, diversification of the product line is almost mandatory to make the transformation. In this way, SMEs can tap into previously inaccessible markets and earn greater revenue. Diversification is risky.
Introducing a range of products and marketing them to a larger market can be complex. However, even as the company grows, the move away from its core product and expertise can have catastrophic effects.
Distribution: The SME that becomes a large business usually faces far more complex distribution challenges. One major advantage that large corporations have over small businesses is their ability to forge and hold partnerships with distributors, suppliers and retailers to offer competitive prices, while still turning a profit. It's difficult, but a smaller organisation must break into this club if it aspires to grow into a larger, more successful enterprise. SME owners and managers who, in the past, might not have operated in this arena, must enter into a distribution network that efficiently meets demand requirements.
Staffing: Staffing must be addressed if an organisation is to expand. The days of thriving on a small base of multi-talented works who fill multiple roles and who are all familiar with their tasks and customer base are gone. The manager must now hire, train and re-train employees to be more productive at fewer jobs and groom specialists rather than jacks of all trades.
Technology: Big and small businesses also differ in the methods they use to create their products and carry out their services. Making the right choice about technology and equipment needed to serve the customer base is very important for the transitioning SME. As market share and demands increase, more efficient and cost-effective methods become necessary.