I was recently discussing how an infant business is like an infant baby. In the early days you need all day and night to look after it because one financial disease can kill the whole thing dead. When it’s new it’s vulnerable, but as it grows it becomes resilient and starts to take on its own life. When the business is of a decent enough size, one financial flu won’t kill the enterprise. Obviously problems don’t just go away, but they change and become less life-threatening.
The odds are stacked against any entrepreneur when they start, but there’s no way that Mark Zuckerberg or Steve Jobs could have set up bedroom businesses from their dorm rooms or their parents’ garage in the UAE. There are too many additional barriers to entry when starting a new enterprise here that western businesses don’t encounter.
Incorporating in the UAE takes considerable money and time – the cost of hiring staff and visas is greater and by law you need a physical office presence. Mr Zuckerberg and Jobs created Facebook and Apple with their friends from nothing; once they were off the ground they could create revenue and contracts, and essentially prove the business model before taking financial risk. That method can’t work here, as any new enterprise is required to invest a considerable sum to legally be able to test the concept and get the business of the ground.
So where’s the money coming from? My experience shows that support from the banking sector for SMEs isn’t great. When I approached various banks I discovered that some didn’t even have an SME division and wouldn’t open an account for me. No banks seemed willing to loan without two years’ trading history – and even then were looking for serious collateral in exchange for sky-high interest rates.
And I don’t blame them. The number of fly-by-night businesses that have defaulted on loans or simply packed up and left means banks are once bitten and twice shy. It has, however, left legitimate businesses in an environment that is hard to prosper in.
With few banks lending to new businesses, the adage that cash is king could not be more pertinent. But we’re living in an environment where late payments are the norm. If a few clients are a bit sloppy with payments you are relying on, you can be completely wiped out.
It’s not all doom and gloom, I hear you say. What about the success stories you hear about that do break these barriers. What are they doing right that others aren’t?
Simple. They are leveraging their small advantage.
Being a small business is also a little like being a speedboat – a huge corporate cruiser can’t turn and swerve quickly, but the speedboat is nimble and agile. Small businesses have the ability to notice opportunities and react to them quickly. Quick decision-making frameworks let you tackle new opportunities at pace and be the first player in the game.
Changing habits and systems in a small business is easier too. Larger businesses tend to have a culture that is resistant to change, and often altering a management process requires a buy-in from numerous people before it can work. Small businesses don’t have that problem and can adapt their management structure to take advantage of the new opportunities at hand.
As all of us working in the region know that business in the Middle East is all about relationships. With the entrepreneur often a key part of client discussions, small businesses have the ability to form these relationships faster and stronger.
Customers like to feel understood, valued and special to the company they buy from. When a client is dealing with the owner and not just a sales representative, he knows decisions can be made and actioned, and their specific demands heard.
From past experience, the biggest mistake I made running a small enterprise was to act like a big business – to be impersonal and general like a big company can be. Focused and personalised is your cutting edge in business. Being able to specialise gives you an advantage to gain clients. As a small business, identifying and sticking to a niche helps you attract clients who want experts in their field.
However you look at it, it can be a tough life for SMEs in the Middle East. Success comes when you leverage the advantages of being small.
Paris Norriss is an entrepreneur and currently Partner in Coba Education, which provides educators to schools and institutes
