The word “SME” (short for “small & medium enterprise”) has climbed a few notches higher in the consciousness of Africans and in particular Kenyans recently and you could attribute that in large part to the courtesy of President Obama visiting Kenya and participating in the GES (Global Entrepreneurship Summit) and subsequently pledging over KES 100 billion to SMEs.
If you ask any self respecting Kenyan in employment or otherwise, s/he will always tell you about their small business on the side or they are writing a business plan and lately that has become “I have a business in the SME space”. Given this zeal for entrepreneurship in Kenya and our SME sector bandied about as the engine of the economy, it would be interesting to ask how many SME transcend from S to M and subsequently become large businesses. We know the answer to that question is “not many” and hence the more interesting question would be why so many of them remain S “small” and what are the main challenges for so many entrepreneurs in scaling their business and growing it and making a bigger contribution to our economy.
1.Understand the SME Value Chain
The key to understanding the constraints of SMEs is to first grasp their value chain. An enterprise starts off with an idea or business plan which could be a great product or service. This product or service requires capital which could be intensive in the case of development of a product that requires heavy machinery, factories etc or could be light in case of a consulting business which requires an office and related infrastructure. Every enterprise than has to find a way of deploying this idea to their target market which could be consumers, businesses or governments. This is the stumbling block for most SMEs.
2. Identify your target market
Why is this so difficult? Accessing your target market entails first and foremost identifying clearly who your target market is and then finding an efficient avenue to reach them. This can be done efficiently in a mature market where there is enough market segmentation due to high competition and an entrepreneur can pick and choose their target market right down to the habits of people as is evidenced by the growing popularity of Facebook advertising.
3. Don’t go with the flow: Know which channels your audience is in
In Kenya, most businesses think they would have to access main stream media advertising to reach their desired target market. However, extremely high costs and implicit wastage deters most SMEs from being able to access this medium. For eg. A half page ad in the Daily Nation would cost around KES 1 million for 1 day. Most SMEs do not have that much as their entire budget for the year. In addition to the cost, however, there is enormous wastage for an SME by picking such a medium. Take the case of a restaurant, which would draw about 80-90% of its revenue from residents/employees from its immediate 4-5 neighborhoods. If it places an ad in a national newspaper it gets the eyeballs but the likelihood of someone crossing over from town is extremely minimal and the cost of any incremental visitors to the restaurant as a result of the ad is enormous.
4. Capitalize on growing usage of mobile phones and internet accessibility
All other mainstream media such as radio, print, digital avenues of newspapers etc are extremely prohibitive from a cost perspective and most SMEs seek capital primarily to cross this bridge of accessing their market. However, due to the enormous wastage this is a dead weight loss to society. In addition if an SME wants to capitalize on the growing usage of mobile phones and internet accessibility, they need to appear in search engine results when a user searches for their products or services. However, this route is also ridden with high costs for SMEs as the mechanism of search engines is such that the highest bidder for a key word appears on top. SMEs would need to hire a search engine optimization (SEO) expert to appear on these search engines and the cost of an SEO expert is extremely high. Therefore, many SMEs in Kenya will find themselves shut out from search engine results.
So whats the solution?
5.Get advertising and marketing channels that work for you
There has to be a platform that connects consumers and these SMEs such that consumers are able to find the products and services of these SMEs easily and the SMEs don’t have a high cost burden to be “found”. Yululate.com is just such a solution. It provides a standard listing which is FREE for businesses so that they can appear in a directory listing format and if they want to have their key words and map they can choose a premium listing for 10K a YEAR. That is an amount that should not be prohibitive to any small business. Yululate.com is an enabling platform dedicated to giving businesses an opportunity to connect with consumers that are looking for them.
Tell us about your challenges as an SME and what we can do to help you.