It’s often said that small businesses are the backbone of the economy – and there are a good number of statistics to back that claim up: there are over 530,000 small businesses in New Zealand representing 97% of all firms. Together, they account for 28% of employment and contribute over a quarter of New Zealand’s gross domestic product (GDP).
I’d argue that they contribute even more considerably to New Zealand’s Gross National Happiness (GNH) index, but that’s a story for another day.
Small-Medium Enterprises (SMEs) tend to face a different set of challenges and often bring different perspectives to the table than big businesses. The truth is, most successful SMEs are naturally quite agile businesses – whether they feel it or not. Being small enables them to be nimble and responsive to the market. And when they fail to be, they simply shut down.
There are a series of key reasons for this natural agility and we think it’s important for all of us to understand the reason, the rationale, and the reality. Here are three insights to begin that exploration:
1. Smaller markets. Higher margins. Greater adaptability.
Outside of my work for Redvespa, I’m a small business owner myself. I’ve seen that small businesses typically see much higher margins than their big brother corporates. However, let’s not pretend that this means that SMEs make easy money – far from it. While big businesses may typically have lower margins, they also have efficiencies of scale which allow them to mitigate a huge number of costs – very real costs that SMEs cannot afford to mitigate.
The fixed costs of removing small inefficiencies are often too high for SMEs – but that doesn’t mean there aren’t bigger inefficiencies needing to be dealt with.
SMEs can be growth-restricted for a variety of reasons. Perhaps the demand growth for products and services is limited, or perhaps the barriers to market entry are so low that it’s not efficient for any one player to get too big. Whatever the reason, many SMEs are often fighting to maintain their position and make a decent profit that rewards their skills and appetite for risk. However, it would be foolish to think that SMEs, therefore, naturally operate as efficiently as they should. Just because it’s not always worthwhile to mitigate small inefficiencies, that doesn’t mean that there aren’t process improvements that would significantly increase efficiency. In fact, sometimes these inefficiencies can be the exact barrier to growth which, when overcome, unlock a whole new world of opportunities for the business.
2. Levelling up and enabling growth.
We don’t like to assume that growth is always the goal – it’s not, and sometimes it’s better to have a simpler and more peaceful work-life balance. However, growth certainly isn’t a bad goal either! Perhaps you’ve heard some success stories of businesses overcoming barriers to growth. We’ve certainly heard (and written) those stories.
From time to time you’ll hear about a SME owner or General Manager who had a revolutionary idea for how to solve an inefficient workflow and spring the business forward. They’re exciting and inspiring stories to hear!
However, working with the number of businesses we do, we’ve seen that these stories aren’t as common as people would like them to be. And there’s a good reason for it: Small businesses already run so “efficiently” that they don’t have the capacity to enable the right people to take a step back with fresh eyes and work on the problems that affect their day-to-day work. Often this problem of being time-poor starts at the top and works its way down through the business. It’s totally understandable and in many ways, a natural outcome to “the game” when everyone is trying to maximise immediate returns on their time.
Sometimes it’s also a case of simply not having the right people with the right skills to get to the heart of the problem.
3. Finding the right person for the job.
In an ideal world, SME owners or General Managers would be the best person to review how the business runs. After all, they know it inside and out. That’s why, if you’ve been running an SME for any length of time, you’ve undoubtedly been told “make sure you take time to work on your business, not just in it”. In fact, you’ve probably heard it thousands of times. It’s true. We all know it’s true. But that doesn’t always mean it’s realistic. Yes, it should be a priority, but it’s not the only priority, and it often just doesn’t happen. At least, not to the extent it should.
And that’s why sometimes, you need someone else.
Someone with the humility to recognise they don’t know your business as well as you.
Someone with skills that complement yours.
Ideally, you need someone with experience helping SMEs address the inefficiencies that are holding them back.
Perhaps it’s your work culture being held back by a process that causes friction between employees. Perhaps it’s your plant and machinery bill being too high because maintenance processes are being overlooked. Or perhaps, like so many others, you simply haven’t had the time to streamline your workflows in over a decade despite introducing new systems or processes. Maybe you simply need someone to help you define and bring clarity or structure to that problem that has been simmering in your mind for months or years?
We’ve seen countless opportunities for quick wins in small businesses, often not attended to purely out of lack of time and capacity. More often than not, these opportunities sit in the back of people’s minds. Sometimes all they need is the right person to ask the right question, and positive change can happen pretty quickly.
We love seeing those quick wins come to fruition, and that’s why we love working with small businesses.
At Redvespa, we ourselves are an SME. We’ve been on our own journey of growth and adapting since 2003, and we’ve built some incredible relationships over those years. We’ve spent countless hours on our own business, and we’ve come to appreciate the strengths, weaknesses, struggles, and opportunities we have as a medium-sized business.
We continue to believe that at the end of the day, all business is about relationships. And we work accordingly. We know our customers, and we care about their outcomes.
It sounds simple, but when we first take you out for a coffee, you’ll know it’s true.
So, when the time comes that you need an experienced consultant to support you on your journey, give us a call and we’d love to work with you to unleash your business’s potential.
Here at Redvespa, we walk the talk. Not only is our family-owned company a people-focused B Corp, we put our money where our mouth is and invest into what matters to us most: People. Check out more about what it means to be in Business for Good.
Sam Butcher is a Redvespa Consultant based in Ōtautahi Christchurch. When he’s not helping other SMEs unleash their own potential, Sam has turned a passion for LEGO into his own small business, the Christchurch Brick Shop. You can find Sam on LinkedIn here.