The Challenges, The way forward for SMEs

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Adeola Adeyanju, Managing Director, Cinalt Resources Limited

In this interview on SMEDigest Radio Show on Inspiration 92.3FM, Adeola Adeyanju, Managing Director, Cinalt Resources Limited, looked at some complaints small business owners in Nigeria have especially the operating environment, and proffered some solutions.

Excerpts.

What have you seen as internal (self imposed) and external challenges faced by SMEs? 

Whether you are talking about SMEs or big corporations, everybody have internal and external issues. The internal issues are not limited to SMEs they are just more pronounced because of their scale. They don’t have the buffer that the bigger businesses have. Those internal issues are of management concerns, level of knowledge, availability of funds, (which is where most SMEs assume they are most challenged) and availability of raw materials if they are manufactural. 

Then, you have external issues that are also common to all, whether big or small. Government policies, the flip flop of those policies, multiple taxation (this where local government, state government and federal government tax businesses beyond what is suppose of them). There is also infrastructural issues. Recently I was talking to someone in Benue State, and he said as they drove on the road they saw pineapple and other fruits that were abandoned by the road side because the farmers couldn’t get them to the market in time. Whatever they don’t sell from their farm, they left it on the road side to rot. Yet, we have some other parts of the country begging for these things and they are ready to pay a premium. This happens because there is no road infrastructure to connect.

Have you faced some of these challenges personally?

It is not enough to have an idea. Some people start out because they had brilliant idea, or they are tired of their current state of employment. So the SME route was a way out. None of the reasons I mentioned for starting a business will help you survive. The statistics for SMEs are horrible. In the first two years, about 50% of SMEs will die. After the next 3 years making 5 years, 70 to 80% of those SMEs do not make the transition. It is critical that lessons are learnt. I will give you an example. I had an uncle who came to me at one point and said to me, ‘‘I had this great idea for fishing. I said to him, great idea. We didn’t had to spend money to make all the baths. We will do natural pond by digging a hole and line it with net.’’

It sounded like a brilliant idea. So we started the process, bought the fingerlings, and I was buying the feeds every month. About this time that year (rainy season), when it was getting close for us to start selling the fishes and I will get some returns from the business, there was this heavy rain that came. Because the land was on a low plain, the pond got flooded and the fishes rose with the water and found their way into the community. The people within the community started catching fish in their homes and were thanking God for the miracle of fishes the rain of blessing has brought their way.

One thing I never did was visited that pond. Which was an error. I kept sending money without having enough information about what I am getting into. If I had visited that pond, I would have observed that error of low plain and ensure it was corrected. 

A lot of people start side hustle they know nothing about and put people in it to run it for them and they never bother to find out about how things are running until the entire thing dies. That thought me a lesson, anything I cannot be part of, aside from putting money in things like stock market and bonds that have systems that govern them, I don’t do it. Don’t start out with something that you cannot have control over and leaves you dependent on people. The major problem with SMEs is that there are not just that many good people, whether in terms of character or in terms of knowledge. 

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But sometimes you find people who are good who want to do right, but they don’t know how to do right, because they don’t have the training. The person who is starting the business doesn’t have enough training to pass on the knowledge that the business requires. So you have the blind leading the blind.

What is the way forward from these challenges?

One of the first things we must address is the knowledge gap. We, sometimes, find an instance of not being knowledgeable enough or too knowledgeable. I say that with due apology to a lot of people. When knowledge is not enough people can tell. But you find that when people have done all the MBAs and they know all the Ps of marketing, all the Porter’s forces and all of those things, very often they feel it immune them from the reality in our environment. You will find out that most of the businesses that failed are started by this truly brilliant people. Recently I was talking to a group of people, and I told them it appears that the more we learn, the more stupid we become. My uneducated uncles and aunts do tell me that you don’t test the depth of a river with your two feet. You put a toe in first before going further. But, all these brilliant people, raise capital of $200,000 or $1,000,000 and just throw it into something they have not done before. It is incredible. That is why people are shocked two years down the line that they’ve failed.

In Nigeria for example, the Igbo trader apprenticeship programme does not only help to bridge a knowledge gap, it also helps you to learn with somebody else’s money. So that in the learning phase, there is an Oga’s money who seemingly has deeper pocket like the big business who can take the shock. If you read Malcolm Gladwell’s Outliers, it tells you that, “It takes about 10 years to master something”. It is only in this age that I see people who think they are masters because they have read a book. You find that the Igbo guys shop grows from one to two, to three and so on. The amazing thing is, they have sustained the businesses without any formal education. Why? Because they have an education in their trade. 

I studied engineering. But all my engineering knowledge did not help me sell spare parts. People have become too important to learn what is important to them. That is why I personally have a policy never to give my money to anyone who hasn’t demonstrated any form of apprenticeship. The form of apprenticeship can be intern or learning from someone who is already doing what you want to do. The truth is, anything you try to escape during pregnancy, you will suffer in incubator.

Secondly, I find that a lot of SMEs build like Nigerian builders. If you have ever seen a Nigerian builder building a house, and you approach him and say, this wall is not straight. The response is usually, we will correct it when we are plastering. To correct when he plasters means that he will spend more when plastering. Because the plastering is also excessive, it is going to crack eventually. If even painted with the best paint, it will look good for a while after which the wall will crack later on. Instead of doing the right thing by setting a line, making sure that the blocks are straight in the first instance, we neglect the basis. This shows that we are not dedicated to do the basis. We want to do cosmetics; quickly set up a website, open social media handles and expect to make money instantly. We are not patient to build our business; we want overnight success. That is why we have businesses that spring up and in about two years they are no more. I have only two awards on display. One in my house and the other in my office. One is the plague that says, 10 years award in a place where I volunteered. The other one in my office says 15 years. These are the only two I display, because these are the only two things that has demonstrated that I am consistent at something. By fluke one cannot becoming a million this year.

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Another challenge most SMEs talk about is the issue of lack of funding. I have a lot of people with money to invest in businesses, but the issue is they cannot trust a lot of SMEs operators with their money. These people I am talking about are not banks, but a pull of professionals with a lot of money idle to invest. The truth is, most SMEs have not been proven with the little they have now, so it is difficult for these professionals with a lot of idle money to trust them with money.

What should those who are about to start a business do before starting up?

When you are coming to the market, you must know that you are coming to compete with big players and you won’t have their kind of big pocket to start with. So come in a differentiating way. Like Sun Zu would say, you have to change the playing field. That means, change the basis for competition. Whenever you come to the table and you don’t have competitive advantage, it is a sign that you shouldn’t take on such business. If you can’t do it faster, cheaper or provide more convenience or do something that the bigger players cannot provide, don’t do it at all. The strength of anything can also be its weakness. The bigger guys may not be able to respond fast as a result of process. For instance, they may need about three or four persons to sign a document and the board will sit before a product is shipped to customer. You can make shipping that product faster than the bigger company.

Secondly, if you have an idea, it is not enough to present it in a lovely PowerPoint Presentation. Any idea looks good in PowerPoint. You must also put it in Excel Sheet. Excel Sheet is all about numbers. If you put a number that doesn’t pencil in Excel Sheet, it won’t work. Your numbers must pencil for it to give you the right final outcome on Excel Sheet. When the numbers work, you can then put the grammars in place.

Thirdly, don’t have a confirmation bias. Just because you’ve worked so hard on your idea doesn’t mean you will not put it to test. Ask yourself and people who are constructive in their criticism questions like, would you buy this product if you have need for it? Why will you buy this and not others? Do you think this price is equal to the value? If you can answer these questions without bias, I think you are ready for business.

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