For most of my working life I have worked with Small & Medium-sized Enterprises and occasionally large companies and I can tell you they are very different. Not just in the obvious way in that one is bigger than the other but in almost every way. What so many people (especially external advisers and legislators) get wrong is they don’t realise an SME is not a small version of a large company and should not be treated as such.
Depending upon your definition SME’s make up between 90% and 99% of all businesses in the UK. They are critical to the health of the economy.
Generally speaking SME’s get a bad deal. Many people who advise them have either come from a large company background and have never worked for, let alone owned or started an SME. Some are given an SME to work with by the organisation they work for as part of their progression to advising larger companies.
So, why are SME’s different? Let’s look at some of the main areas and why they are important.
Ownership / CEO – many SME’s are part or completely owned either by the people who started and work in them or have very few external investors. When the owners need to raise funds it is often their personal assets that are on the line. Very few shareholders and even fewer senior executives of large businesses have had to put up their house as collateral and will lose it if things go wrong. Unless you have actually had your house on the line you cannot begin to understand how it feels at 3:00 am when things are not going well. How many senior executives of large companies would be prepared to put their personal assets on the line for their company?
Resources – In large companies people specialise. There are departments, or at least dedicated people for finance, marketing, HR, legal, health and safety, payroll and so on but in an SME it’s different. Individuals are likely to play several roles and in many cases that may well be roles for which they are not qualified. The production manager may well be the health and safety officer. The finance manager often performs a quasi legal role as well as being responsible for payroll and in some SME’s even HR. Marketing will often be the responsibility of whoever is doing the sales. At the end of the day it all falls on the directors who equally are likely to be inexperienced and / or unqualified in many of these areas. This means that SME’s require a lot more help in these areas than large businesses and this is a subject we will return to in Part 2 of these blogs.
Leadership – The problem with leading an SME is that it is very different to leading a large company. The board of directors will be much smaller and usually made up of people who are competent in their area (they may well be the people who started the business) but not necessarily competent leaders. Leading a small business with less than 50, and in many cases less than 10 employees is very different to leading a company with 500, 1,000 or more.
Vulnerability – in large organisations often several people will be able to do the same job. If you have 500 employees then losing 1 should not make a difference – even if that 1 is the CEO. SME’s are different. As stated above, often an individual will not only be the only person doing that job and with the knowledge to do it but may well be doing several jobs at the same time. Losing one person in an SME is often the same as a large company losing a whole department or indeed several departments.
Viewpoint & Flexibility – one of the biggest advantages SME’s have over large businesses is that they can take a medium and long term view. If something is right for the business in the medium or long term but has a negative short term effect then as long as it has the financial resources an SME can take a very different view to a large business with shareholders. SME’s are also way more flexible than large businesses and well manged SME’s are able to take advantage of this in a way their larger cousins could only dream of.
In the next blog we will look at why SME’s deserve more appropriate help and advice.
If you want to receive our weekly newsletter, please Subscribe