We talk about the role of SME’s in overall economic development, wealth creation and distribution. In fact countries have relied on SME’s and really done and doing well. Small, medium and micro are the terms used by the scholars and institutions but in fact the issues these SME’s goes through are the same as a big organization. But how SME’s respond to an internal or external situation is different than its big brothers. While the country talks the importance of SME’s still SME failure rate is very high around 45% in Sri Lanka (Mirror Business 01.04.2016) and it is worth studying the reasons and find remedies.
Mostly single owner or family owned SME’s are entrepreneurial enterprises which were formed and developed on a functional expertise. In a dynamic business environment overall business management skills are necessary than functional expertise only. The big ones have the resources within and willing to bring in this expertise to the organization. But the SME’s do not want anyone else other than the clan to enter the business and this attitude sometimes makes the situation bad to worse.
Taxes the ghost behind
The general view of SME’s is keeping record of accounts will lead to pay taxes. Simple way to avoid paying taxes is don’t keep records. The means and methods of tax collection also have supported this practice comfortably. This misunderstanding makes owners lack the necessary information and timely data to take sound business decisions.
Why do we fail?
In order to establish a successful and suitable business, there should proper business planning, updated accounting data, proper financial, and HR management practices. Business planning based only on number of years’ experience, lack of record keeping and non-availability of accounting data, poor financial management and practices and availability of needed knowledge.
Calculated risk taking and well informed business decisions are need of the hour for SME’s. Availability and accessibility of these knowledge based services are necessary for SME’s to make sustainable progress.