Raphael John-Lall

Small and medi­um en­ter­pris­es (SMEs) are now find­ing it dif­fi­cult to sur­vive through these tough eco­nom­ic times, which has im­pact­ed on em­ploy­ees los­ing their jobs when they close down.

So said Johnathan Adams, chief ex­ec­u­tive of­fi­cer, Small En­ter­pris­ing Busi­ness As­so­ci­a­tion (SE­BA), on Tues­day. "One can­not de­ny that some small and medi­um en­ter­pris­es are go­ing out of busi­ness." He said some small busi­ness own­ers are find­ing it dif­fi­cult to main­tain their busi­ness­es and are now go­ing back to be wage earn­ers. Adams point­ed out that ten per cent of small busi­ness­es have gone un­der in the last year be­cause of the down­turn in the econ­o­my. This amounts to rough­ly 50 busi­ness­es out of the 500 SE­BA has been mon­i­tor­ing.

Adams said some of the busi­ness­es that failed have be­tween three and five em­ploy­ees, who are now on the bread­line. "The oth­er 90 per cent of small busi­ness­es that sur­vive con­tin­ue to face the tur­bu­lent eco­nom­ic times." To get around this, Adams said some small en­tre­pre­neurs and em­ploy­ees are be­ing in­no­v­a­tive. "Peo­ple are now shar­ing staff. It's some­thing like an em­ploy­ee pool. In the gar­ment man­u­fac­tur­ing sec­tor, you see that." He gave the ex­am­ple of a work­er work­ing two days for one small busi­ness and an­oth­er two days for an­oth­er in the same sec­tor. In this way, a small busi­ness does not have to have a full-time staff and the sec­tor still ben­e­fits from the em­ploy­ee's skills. Adams said the em­ploy­ee al­so ben­e­fits from hav­ing from be­ing able to "free­lance" with more than one em­ploy­er.

Sec­tors af­fect­ed

He said the SME sec­tor that has been most af­fect­ed is the whole­sale/re­tail sec­tor. "Many of these small busi­ness own­ers have had to let go staff and sell from their homes," he said. Adams said the rea­son why the whole­sale/re­tail sec­tor has seen small busi­ness­es clos­ing down is be­cause of the in­abil­i­ty of small en­tre­pre­neurs to pay rent for their busi­ness. He said in a busy shop­ping dis­trict, rent space could amount to $30/square foot. "This could re­sult in rent of $3,000/month. If it's in a mall, the rent would be much more ex­pen­sive, amount­ing to $50/square foot. "We are not query­ing the rent. We recog­nise the cost of raw ma­te­ri­als and main­te­nance. It is re­al­ly the drop in con­sumer spend­ing that has af­fect­ed the SMEs." Adams said oth­er SME ar­eas like com­put­er op­er­a­tors, gar­ment man­u­fac­tur­ers have not been af­fect­ed as much as the whole­sale/re­tail sec­tor.

Re­cy­cling SMEs

Adams said when small busi­ness­es close their doors, there are new en­tre­pre­neurs ready to take their place. He said that may seem pos­i­tive on the sur­face but, in re­al­i­ty, it does the in­dus­try no good. "The in­crease in these re­place­ments for en­tre­pre­neurs does not mean an in­crease in sec­tor de­vel­op­ment." Adams said many wage earn­ers who want to start up a new busi­ness come in­to the sys­tem, get a loan to start be­cause they have nev­er been in busi­ness be­fore and have a clean record. The sec­ond cat­e­go­ry of new small busi­ness own­ers are peo­ple who have just lost their jobs and are look­ing for new busi­ness op­por­tu­ni­ties.

Adams said when SMEs fail, there's this new batch of small busi­ness own­ers com­ing in. When these new SMEs start, they have to go through the same "ges­ta­tion pe­ri­od" of learn­ing, of tri­al and er­ror that the ones be­fore them ex­pe­ri­enced, he said. "This is sim­ply re­cy­cling. There is no de­vel­op­ment." Adams said less than one per cent of small busi­ness­es grad­u­ate to medi­um or large busi­ness­es.

"There is no ev­i­dence to sug­gest oth­er­wise."

SME life­cy­cle

Adam said many of the small busi­ness­es that fail are start-ups.

"Out of the busi­ness­es that we have been mon­i­tor­ing, of the per­cent­age that failed, none of them has been in busi­ness for more than five years." He gave a num­ber of rea­sons why new small busi­ness own­ers fail in the ear­ly stages. "These in­clude poor man­age­ment skills as they re­late to cash, prod­ucts and hu­man re­sources."He said many new busi­ness own­ers place em­pha­sis on the wrong things in the first few months of the busi­ness.

"Peo­ple are not sure how to spend mon­ey. Ei­ther they over­stock or un­der­stock." In the life­cy­cle of a busi­ness, it takes about three years for the busi­ness to set­tle, Adams said. "Dur­ing this three-year pe­ri­od, the busi­ness is at risk." Adams said once a busi­ness cross­es the five-year mark, "it would be in busi­ness for the long haul. "Sta­tis­tics show that af­ter five years, you are more than like­ly to suc­ceed."

Why new small busi­ness own­ers fail in the ear­ly stages:

�2 poor man­age­ment skills as they re­late to cash, prod­ucts and hu­man re­sources.

�2 own­ers place em­pha­sis on the wrong things in the first few months of the busi­ness.