Saturday, June 28, 2008

SMEs - why do SME turnarounds so often fail

The failure rates of SMEs are often used as a reason not to fund their establishment and growth. Is this a fair assessment? Are they high risk?

There is unfortunately a certain amount of truth in the fact that SMEs are their own worst enemies, or rather the entrepreneurs who run them are. Entrepreneurs often allow their own self confidence to override their ability, and so they often ignore the warning signs until it is too late. Alternatively, the moment they see any form of positive activity, they immediately stop the corrective action, in the belief that they have solved the problem.

I recently was contacted by an SME in the media sector, on the grounds that after many years in business they still lived from hand to mouth, albeit that the business had grown. They were still negotiating with me to help them turn the business around, when they received a large order. They immediately stopped the process because they felt that the large order would now solve their cash flow problems. They had still not addessed their problems, but the big order convinced them they had.

Entrepreneurs normally are sharp enough to know when things are wrong. The most difficult part is learning to put the ego aside so that you can address the problem in a subjective manner. Do not allow yourself to fall into this trap. Remember that a smart entrepreneur fixes things or gets help if they cannot do it themselves. Act decisively and quickly, because it seldom "comes right"!!!

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