As it appeared in the Daily Nation on April 11th, 2017
The future for Small and Medium-sized Enterprises (SMEs) in Kenya and across the globe in bright. Currently, there is a buzz around entrepreneurship. Many conferences, expos and initiatives targeting entrepreneurs and SMEs are happening left right and center. In addition, smart graduates are leaving universities and starting companies or choosing to work in SMEs. The profile of SMEs has been gradually rising.
Though there seems to be no universal definition of an SME, it is easy to identify one. Different countries use different indicators. The number of employees and the annual turnover are the most common indicators that a firm is an SME. The International Finance Corporation for example considers any independent, non-subsidiary firm with less than 250 employees to fall in this category. The European Union considers those with less than 250 employee or less than 50M Euros in annual turnover as SMEs and those with less than 50 employee or less than 10M Euros in annual turnover considered as small. These numbers may differ depending on the industry. While some of these SMEs evolve into large corporations, others choose or are forced by circumstances to remain small.
SMEs provide livelihoods to many through the job opportunities they create either directly and indirectly. They as such play a critical role in steering economic development. In Kenya, though the state of SMEs is not yet clearly articulated their role in the economy is evident. SMEs provide many products and services. Despite the high failure rate associated with start-ups, SMEs that have survived to see their 5th, 10th and 20th birthday and flourished. I am certain we can all name an SME around us that is flourishing.
Many SMEs are owner manager led and most can be distinguished by the nature of challenges they face. The main challenge that I have come across in many SMEs is lack of internal competences to successfully manage business growth. SMEs that have been able to recognize this challenge and that have intentionally built their internal competences are staying ahead of the competition. Though not all SMEs are meant to grow into big corporations, those intending to grow must develop a business model that allows them to successfully scale. Java house is a good example of an SME that has been able to develop a business model that has seen it successfully scale.
Working with start-ups and SMEs has been one of my most intriguing endeavor. I not only appreciate their critical role in our economy but also see their great potential. In particular, I see SMEs as the backbone of innovation and this has been evident across the globe. In addition, when entrepreneurs realize that many big companies were once start-ups, they should be encouraged to keep building their enterprises.
The successes achieved by the start-ups that have survived all odds points to a promising future for SMEs. There are many players to make this a reality for many others. The government can provide an enabling environment, our learning institutions can impart the skills and the mind-set needed and those offering support services to SMEs can address specific challenges. I foresee a bright future where SMEs will not only be at the center of improving livelihoods but also will contribute heftily to the fight against poverty in Kenya.
Lucy Kiruthu is a Management Consultant and Trainer connect via twitter @KiruthuLucy