How SMMEs Can Make Themselves Worthy of Investment

How SMMEs can position themselves as investment-worthy businesses that can grow

The time has come for SMMEs to focus – on themselves. Leading the way is Hepsy Mkhungo, a renowned South African thought leader in the ESD space, an international speaker, entrepreneur and mentor of hundreds of small, medium and micro businesses. Here she speaks with authority on why independent businesses should not despair, but thrive … if they take the right steps.

Most Small, Micro and Medium Enterprises (SMMEs) aspire to grow and some even have ambitions of eventually becoming large profitable organisations – but this is not easy and many small businesses ultimately fail to scale.

While there is no silver bullet, a key element to achieving growth is for SMMEs to position themselves as investment-worthy businesses to be incorporated into the corporate supply chain. To do this, SMMEs must ensure that they have the adequate managerial and industrial skills, while also maintaining a robust financing model.

Unfortunately, many make the common mistake of fixating on the product or service they provide and neglect to focus on growth, the customer base or attracting investors to their business, all of which would invariably produce the dynamics of growth and job creation.

Being part of an established value chain allows SMMEs, which often lack brand validation, to gain a clear identity. Yet, being integrated into a corporate supply chain can hold some challenges for small businesses that lack credentials and trade references.

In this case, they could consider building their credentials by subcontracting to larger organisations in niche markets that are not attractive to big corporate players. Small businesses can also gain visibility by participating in corporate development programmes, which are designed to ultimately support SMMEs from a business perspective if they stand out from the rest. But make sure to build your credentials over time, or corporate opportunities will be few.

Most corporates have enterprise and supplier development programmes that are very active and that is where most opportunities lie. Simply put, SMMEs can build their credibility by taking on work that is not attractive to their competitors.

In some cases, small businesses can even approach their competitors to provide subcontracting services if there are capacity constraints. So there are different strategies to apply to build trade references and solid financials, while also improving your product.

Being part of the corporate supply chain should be seen as a continuously unfolding process which is dynamic and can change over time. Successful SMMEs will leverage their innate agility to ensure that they stay relevant to the business needs of their clients.

Most SMMEs’ ability to pivot and respond to changing conditions was severely tested by the COVID-19 pandemic, which forced them to adjust or revise their product offerings, as the way business is done has changed drastically. Those that rely heavily on physical infrastructure to run their business have had to at least adopt a hybrid model to continue servicing their clients.

This not only resulted in many SMMEs having to change their entire skill sets, but also transformed the employment landscape, as most people now demand some form of flexibility in terms of working remotely.

The pandemic also highlighted how integral the adoption of technology is to a business, even if it is part of a hybrid model. So it is crucial that SMMEs look at digitalising their offerings to whatever extent they can, as technology needs to be a key component of delivery methodologies.

Additionally, small businesses that are part of the supply chain are guided by the broader needs of the corporate arena and most large enterprises have adopted remote working models. Largely, this has also become a requirement for their suppliers.

The SMMEs that stand out as investment-worthy businesses are the ones that can pivot quickly to continuing seamlessly servicing their clients. Keep in mind that your corporate client still requires the same service you’ve previously delivered and wants to see consistency. So, it is all about how innovative and quickly a business can respond, and, since small businesses are agile, they should use that to their advantage.

Essentially, these are the five steps that SMMEs should take to be investment-worthy businesses:

  • Be clear about your proposition and ensure that your financials are solid;
  • Systematise your processes so that you can scale when you need to;
  • Woo your customers with excellent service; 
  • Attract the right skills; and
  • Continuously innovate.

Lastly, having market traction is key to attracting potential investors, meaning that your minimum viable product must have traction. Also, you should be able to demonstrate that you have a client base and that you continue to invest your time and resources into the business.

Not every investor will say ‘yes’, but then not every investor is right for you, or you for them. Remain deliberate and continue with conviction – as long as this is supported by reliable data. Successful SMMEs understand their competitors, understand their markets and also have a good understanding of where the gaps are.

By Hepsy Mkhungo, CEO, One Linkage

For more information, visit One Linkage

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