Developing Small, Medium and Micro Enterprises (SMMEs) as suppliers to larger businesses can be a catalyst for positive economic and social change. A four-pillar support approach is one way of creating sustainable long-term enterprises.
A thought-out entrepreneur selection and screening process is a pre-requisite to ensuring a successful outcome of the four-pillar approach. This is because it is fundamental to identify the best available talent, those with businesses that can grow and become independently successful when supported. Furthermore, sector opportunities and supply chain integration points should be defined at the onset to ensure that entrepreneur growth and development is met with an end-state commercial opportunity once the appropriate business maturity reached.
Once this selection process has occurred, the four-pillar SMME support approach seeks to maximise entrepreneur development potential. It does so using a combined and targeted approach described below.
Market support
Market support is critical among the four pillars because it determines the SMME’s ability to access both sustainable and long-term opportunities within the market. An SMME can partner with a large firm and leverage their market access infrastructure, such as supply chains and market penetration, to boost growth and sustainability. Additionally, large firms can integrate SMMEs into their own supply chains, thereby granting entrepreneurs secure and consistent revenue to grow their businesses over time.
Large businesses can harness SMME strengths in several ways for mutual benefit. This enables service delivery for the large business through the provision of targeted services and revenue generation and experiential learning for the SMME. Large firms also play a role within export markets and can provide SMMEs with unique opportunities to serve potential overseas customers, resulting in growth acceleration and expansion.
Access to finance
A significant challenge faced by SMMEs is access to finance. Given their developmental nature and the perceived risk, SMMEs regularly struggle to secure finance through established means due to stringent funding entry requirements, cumbersome processes and/or limited knowledge of the availability of funding. Specialist funds designed to support SMMEs can provide working capital to enable entrepreneurial growth whilst sustainably managing capital through lower interest rates or alternative repayment options such as long term return on investment. Alternatively, large firms can assist in providing capital, or industrial or trade finance, so that an SMME has the necessary financial support to operate, trade and become self-sustaining.
Entrepreneur capabilities
SMMEs are predominantly entrepreneur-driven enterprises that depend on the capabilities of its founders to secure market access, finance and market their product or service to gain a foothold in the market. Entrepreneurs’ technical and business management skills should be strengthened where necessary, so they have the capabilities to manage their nascent businesses in a sustainable way. Entrepreneurs can shadow their counterparts, peers or mentors in mature businesses to accrue experience and skills, and study further at institutions of higher learning – while being financially supported to do so – to enhance their technical and business skills.
Business capabilities
The business capabilities pillar is focused on improving SMME competitiveness through business development, leveraging economies of scale, building relationships with key market players and utilising IP for improved internal operations and efficiencies.
Business development specifically deals with an SMME’s ability to generate revenue through increased sales, which is also affected by both product/service development and marketing. Economies of scale allow an SMME to procure raw materials, logistics and manufacturing at a level where costs can be saved and efficiencies realised. Relationships are key as they can unlock new market opportunities, financing, create competitive advantage and offer valuable knowledge on operational or market gains. IP can enable service/product differentiation, and greater market traction for an SMME.
If your organisation wishes to partner with SMMEs to improve its own supply chains and competitiveness, visit our website to find out more about our Economic Development service offering.
