SMEs - why existing SMEs fail

I am sure to have a few people hating me after this blog. SMEs fail most of the time for one simple reason - the owners. The owners generally suffer from the negative side of one of their positive attributes - ego. Ego is essential for entrepreneurs because it drives them forward to greater things. The problem is that it often leads to arrogance and conceit. They do not need to plan, they do not need to read, they no longer need to work 18 hour days, they no longer can be told anything by anyone, and worst of all they can no longer accept their own fallibility. I am eternally amazed at how many people are in deep trouble in their businesses, but they still think their businesses are great and worth a fortune. The moment their businesses are in trouble they put them on the market - but they still represent great value!? I have personally had a number of lessons in humility, and I can recommend them. I have found that the locus of control issue is paramount. If any entrepreneur is unable to accept that any of the problems in the business are due to their own poor decision making, then they are due for a 'correction'. Every now and again I meet entrepreneurs such as Darlene, who cannot suck in the knowledge fast enough to satisfy her craving for improved business. Darlene is enthusiastic and desperate to learn, and I believe can only rise to the top. A star in the making. The economy would be a better place all around if there were more Darlene's.

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"!!!