A lack of experience can frequently be the deciding factor with a downfall. Dr. Ashraf Mahate explains how finding that veteran who can show you the ropes can often make all the difference for a new business.
International evidence shows that taking a business from a startup stage to its corporate adolescence life is fraught with numerous dangers and pitfalls. Therefore, it is no surprise that a third of businesses never see their fifth birthday. By the time of their tenth anniversary, a little over a half of the businesses tend to fail and are wound up. The question that arises is why SMEs have such high rates of failure?
The most obvious answers seems to be that they are undercapitalised, or don’t have enough money on-hand to keep going as a result of an inadequate or, even the absence of, a business plan. Beneath this veneer lies a much deeper cause, namely that a typical SME owner needs to be a jack of all trades; an expert in production, marketing, customer service, logistics and so on.
Of course in reality, this is not possible and invariably SME owners make errors, either due to lack of knowledge or, experience. To make matters worse, SME owners often feel overwhelmed by the growing pains associated with managing their businesses and can become distracted from core management issues.
Despite the passion that they may have for their product or service this is often overshadowed by the strain of managing a business and a job; four weeks holiday, sick leave, medical insurance, housing allowance and educational benefits can at times seem too attractive to ignore.
Academic evidence suggests that the isolation and strain of managing an SME along with the failure rate can be drastically reduced when the owner has sufficient experience. However, very few owners of startups or young SMEs have the required experience of owning and managing a growing business. With that said, this need not be a barrier; an owner can utilise the experience of individuals who have been there and done that and reduce the probability of making mistakes that are avoidable.
This is more so the case for exporting where each country, despite the commonality of language, religion, culture and so on, still requires specific on-the-ground knowledge and experience. A helping hand can be obtained from business contacts and associates but may not be assured in the medium or long term. Similarly, the SME owner may not wish to share confidential information with business associates.
In such cases, the SME owner can use the services of a business coach. More specifically a business coach is a resource that the SME owner can utilise as and when required so that the business is able to achieve a mutually identified set of goals, as well as to enhance the professional performance. In doing so it is assumed that the business coach comes from a background of managing a diverse range of businesses.
There have been various surveys that have shown not only the popularity of business coaches but also their importance for SMEs. For instance in the UK the Chartered Institute of Personnel and Development study showed that 80% of firms in the sample used business coaching. Similar results were also found in Australia and the US. The success of business coaching stems from the realisation that managing an SME is a very complex affair and requires external assistance. Although it may be relatively easy to obtain an export order through an exhibition or the numerous online portals that exist, it is far more difficult to negotiate the sale and deliver as required.
An SME entering the exporting arena needs to be aware of first how to price its product, bearing in mind that there are additional costs involved such as logistics, insurance and so on. Then there are issues with technical standards, import requirements, contractual obligations, tariffs, dealing with agents and distributors, obtaining payment and so on. A business coach who has knowledge of these markets and has exported in the region can assist the SME and hand hold it through the process.
A business coach can also provide a strategic input in terms of developing an export plan which is critical to the overseas success of a firm. In a world of global complexity it requires that the SME owner or manager be a fast learner. However, more often than not there are no real established avenues for SME owners to learn about the global market place. Business coaches can be instrumental and assisting the SME to adapt to global changes and its impact on the workplace.
Similarly, globalisation has made the world more competitive with the need to make fast decisions. In an ideal world the SME owner can research a particular issue and arrive at an informed decision. However, very rarely does the modern business climate allow for such a luxury and information needs to be processed rapidly.
In such a situation a business coach is able to provide a quick answer and in time create a more team-based engagement. This obviously requires the SME owner to learn as well as restructure the organisation so that appropriate skills are developed and responsibilities delegated within the firm.
A business coach can also make an important difference to the internal workings of an SME. For instance, in the world of exporting a firm needs to be ready in terms of not just meeting the foreign country requirements but also as far as internal resources are concerned.
More often than not, SMEs are lured by the huge potential that exporting offers them and tend to forget that they need to ensure that they have the appropriate capacity, processes and procedures in place to fulfil their obligations. As a result a business coach can develop a responsive approach to the organisational development in a tailored manner to overcome current deficiencies in performance.
From a corporate governance perspective, a business coach can bring about professional external advice and thought to the SME. In doing so the business coach allows the SME an opportunity to be proactive and carry out interventions that seek to enhance its performance. In a global world where SMEs are competing with firms from all around the world this seeks to give them a competitive advantage.
At the same time senior managers who tend to be isolated can have someone with whom they can share confidential thoughts and ideas without any internal political influence often associated with discussions that take place with colleagues. Finally, business coaching forms an essential part of the SME owners’ lifelong learning experience. The convenience and tailor-made approach ensures that this lifelong learning can be carried out at different speeds, as well as styles.
The UK study mentioned previously demonstrated that two thirds of the sample who used business coaching found it to be very effective in meeting the needs of senior management. However, for business coaching, especially in the area of exporting, guidelines need to be adopted.
Firstly, the SME owner needs to be prepared to accept the advice provided and employ the appropriate resources to solve the problems. This does not mean that the SME owner cannot challenge the advice given. In fact, business coaching is very different from mentoring. Good business coaches give advice and recommendations sagaciously. The simple reason for this is that the constant provision of advice leads to dependency, which defeats the objective of business coaching.
In fact, a good business coach will ask penetrating questions which take the SME owner into an area of thought not previously considered. Second, for effective results the SME owner needs to set the agenda and become aware of the changes that need to be made. More importantly, the SME owner needs to set the pace at which the two work together and the level of support required. This is brought about through the realisation that the SME owner and business coach are equals and the role of the latter is to achieve increased effectiveness for the former.
Business coaching is a practical and a very cost-effective method for assisting SME owners to enhance their performance and that of their organisation. However, it has to be appreciated that its success depends on the level of commitment by the SME owner to bring about changes in leadership, organisation structure, communication, interpersonal, and cognitive skills. At the same time the business coach has to develop the SME owner and not create a state of dependency.
Dr. Ashraf Mahate is the Head of Export Market Intelligence at Dubai Exports (formerly known as the Dubai Export
Development Corporation), which is an agency of the Dubai Economic Department. Dr. Mahate is also the Vice Chair of the Economic Policy Committee with the Dubai Economic Committee with the Dubai Economic Department. He has written a number of journal articles, chapters in books and edited books in the areas of economics, finance and banking. He has also presented papers at major international conferences. Dr. Mahate has provided extensive consultancy services to various organisations in the areas of banking, economics and finance. He has been a director of a number of companies including a venture capital company and a private equity fund.
Dr. Mahate received his doctorate from Cass City University Business School in London (UK) which was ranked by the Financial Times newspaper as the 12th best university in the world for finance. He read Economics at University College London, followed by a Masters in International Economics and Banking at the University of Wales in Cardiff. Dr. Mahate is a professional educator and received his training at the Institution of Commercial Management (UK). He is also a member of the Association of Certified Anti-Money Laundering Specialists. (ACAMS)
Rushika Bhatia Editor
Rushika Bhatia is one of the region’s leading commentators on business and current affairs issues. She is the Editor of CPI Media Group’s flagship title – SME Advisor magazine. In addition, she leads CPI Media Group’s infographics division – with special emphasis on data, research and statistics. Rushika has a Bachelor’s Degree from Indiana University, USA and is also CIMA qualified.