Why Most Businesses Don’t Grow & How to Fix That?

Ever since Afrineur was born back in late 2016 as Invest Malawi, it has been a great learning opportunity. Hundreds of entrepreneurs have received training and mentorship from some of Malawi’s highest performing entrepreneurs and experts in business development from beyond our borders. It has been phenomenal.

This has been a very personal journey for me as well, at also attempting to grow my business. It has meant unlearning things and re-learning what I need to. You reach a point where you are exhausted from receiving the same results and are ready to do whatever it takes to get to the next level. Luckily, some of the organisations I have been connected to have tried to connect me to the kind of people who can provide support and answers to the entrepreneurs of Afrineur and myself for “next level” progress.

Organisations like Frankfurt School of Management and Finance (Through their European Investment Bank SME facility), have provided a tremendous amount of ongoing support. One of my contacts, Filipe Marques (Senior SME expert) has done a great job teaching us and connecting Malawian entrepreneurs and myself to people we can learn from. One such person he introduced me to is Bert van Manen ( http://www.vanmanen.biz/ ), an international enterprise development financing expert. He kindly answered a lot of questions in person and more via email.

In fact, here is what I asked him in an email:

“…You left me with one burning question which I think you tried to respond to but I feel I need a little more clarification: (paraphrasing your statement) “You said a business that starts out small most likely will stay that size for their period of its existence”.

My question is, is there any way that a small business owner can fix this for their business? If so, are there steps on accomplishing that? (Apart from securing external funding from angel investors or VCs)?”

The response he gave was so thorough, that I asked if I could share his response in a blog. He said yes.

This was his response to my questions above:

Surveys undertaken in 2012 by the government of Malawi and by Finscope reveal that there are about one million (M)SMEs owned by some 760,000 proprietors, meaning that many have more than one business. The vast majority do not employ any persons other than family members. These are invariably micro businesses. In fact, everywhere in the world, even in developed countries, you see that at least 95% of enterprises are micro businesses, up to 5% small, and less than 0.1% are medium and large companies. If every year 1% of micro businesses were to graduate to “small” and 1% of small were to graduate to “medium” you would over the years see a noticeable change in the composition of the business structure. But this is not the case, nowhere in the world. Very few companies grow and graduate to a larger category.

Of course, there are very many micro-entrepreneurs who are simply contented the way they are. They may be running small shops for years, even generations, essentially unchanged. A relatively small proportion aims at growth in terms of turnover, profit, personnel and physical presence. Those that want to face all sorts of difficulties, most importantly, weaknesses in the entrepreneurs themselves which can be summarized as follows:

• A2M: access to markets, that is lack of good sales opportunities either because the product is not good enough, or because they do not know where and how to sell, or because of location for example.
• A2T: access to technology, meaning that the product is not good enough or that the production method is not sufficiently efficient for good profits. The latter is especially true for agriculture which in Africa is dramatically unproductive.
• A2O: access to organisation, such as sector associations for sharing technology and knowledge and collective marketing, this along with representation to public bodies that often put in place all sorts of restrictions.
• A2F: access to finance, to finance the above.

For a business to develop all the above must be tackled, preferably all at the same time. It is totally useless to look for finance if the other elements are not in place, which is rarely the case. So good angel investors offer management support, help in getting markets, etc along with finance.

What are your thoughts on why small businesses fail to grow? What advice do you have? Feel free to share your thoughts and comments below.

Want to discover more about Maclean Mbepula? Find her on Linkedin or here on Medium. She’s written 3 books (one in entrepreneurship from a grassroots perspective (“Challenge Accepted) and 2 poetry books which are available for purchase on Amazon. Feel free to support her work by becoming one of her patrons at Patreon.

Originally published at https://www.linkedin.com.