Tuesday, June 3, 2008

SMEs - mixing personal with business goals (1/2007)

SME clients?! I had a meeting with a SME client today, and it was interesting in that it gave me an insight into how entrepreneurs are their own worst enemies at times. The main cause is their passion, which stops them from distinguishing between their personal lives and their business lives at times.

The SME client wants to grow his business and believes that he needs bigger premises to be able to lay his factory out better, and to have a more "acceptable" (upmarket) showroom than he has now. The SME manufactures a product that is a niche market product, aimed at the higher income groups, and in many cases the "old money" income group. The product could possibly be classified as a luxury product.

His wife feels they need to invest in a property, in order to create an income stream to form part of their pension.The natural conclusion they have drawn is to put these two separate issues together, and they now need to buy their own factory. However, to do so will increase their monthly "rental" costs five fold. It took an hour of discussion to get them to consider that they need to view the two decisions in isolation from one another, and that the main goal of the SME business is actually to increase sales, while the personal goal is to create a passive income through a property investment.

They are now going to assess their options for these two very separate and diffferent goals independently of each other.

But the interesting part of the story for me, is how they initially did not see them as separate.

This is a failing of many entrepreneurs and SME owners, and often leads to them making bad decisions in their personal life in order to achieve a business goal. I know I have done the same. Have you?While faith in oneself is paramount to entrepreneurial success, it should never allow decisions to be made which are to the detriment of your family. It is a difficult line to draw and follow, and as financier to our own businesses it is difficult to say no, but we must learn to temper our decisions with a dose of personal and family care! Failure is an ugly thing for the entrepreneur and his family.

Rob Smorfitt

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