SMALL and medium enterprises (SMEs) contribute significantly to job creation, social stability and economic welfare across the globe and are acknowledged as the engine of the global economy.

In SA, SMEs are drivers of economic growth and job creation. According to an article recently published on an online news site, this sector represents more than 1,5-million self-employed people who contribute about 40% of total remuneration in SA.

The level of unemployment in the local economy can thus be reduced meaningfully in the near future only by the successful promotion of SME output. However, access to capital markets is still underdeveloped, both for SMEs and for entities that could finance these businesses.

However, prior to institutions providing SMEs with any venture capital, SMEs need to develop a solid business plan, supported by financial plans.

To ensure these plans are developed according to the assessment requirements necessary to make the capital investment decision, it is essential for these institutions to identify reputable businesses that can assist SMEs in compiling business plans.

SMEs should implement a process to develop a business plan that will effectively answer the questions of the financing institution, so a decision around venture capital can be made.

The institution should have an agreed process to assist them in making that decision. This should explore the following issues:

Is it a viable proposition?

Where will wealth be created to drive viability?

What products or services will be sold?

Which customers will be focused on?

Which industry will the business focus on?

Where, geographically, will the business operate? and

What are the projects and issues the business will focus on in implementing the strategy around financing, people, facilities and so on.

It is important for SMEs to have a clear business strategy that outlines the industry in which it operates, as well as how this policy will be implemented.

Today, most companies find it necessary to have a strategy that supports its business process. As a result, companies are turning more frequently to consultants to assist with this.

Consultants become valuable when a SME considers the strategic value they can bring — such as in-depth knowledge and industry experience.

SMEs that use consultants to assist them in the development of business strategies — and ultimately the business plan — derive much benefit from this decision, due to a number of reasons.

In many instances, expertise and resources are unavailable internally and gathering such manpower and assets requires much time, resulting in loss of productivity.

Employing the services of a consultant frees the executive to oversee the activities of the organisation and ensures good decision making, regular updating of management skills and helps to keep the executive abreast, if not ahead, of the market.

To allow institutions to invest capital in SMEs and thus contribute to the growth and development of this sector, these institutions need to work closely with the SMEs to develop their assessment requirements.

By presenting and implementing a successful business strategy and plan, SMEs will be able to start, grow and sustain a successful business — contributing the growth of SA’s economy.

 Carolin is partner at Decision Processes International.