Why SMEs Can’t Fulfill Their Dreams

Don’t overwhelm that you have started your own business. Just bring your own boss is not the end of the entrepreneur’s journey. That is only an introduction or the first start of your business. You’ll have to face so many obstacles, problems, and challenges along the way. Be cautious in each step; otherwise, you highly risk failure. The website “Top-Business-Degrees.net” reports that SME is categorized into 3 groups; Group that can earn profits (40% of all SMEs), Group that has medium performance (30%), and Group that faces loss (30%). In looking deeply, we found that 95% of SMEs closed their businesses down after the first 5 years, and 50% in 1 year. Those entrepreneurs aren’t sluggish, discouraged but they haven’t done the right things. So, we’d better learn from mistakes and see why most SMEs fail.


1. No precise goal

Instead of setting your goal to “increase sales” change to “sales will hit 100,000 baht in two months”. Creating a clear plan to achieve goals or define sales volume in each stage with a precise schedule. Make the most of every day and monitor whether sales hit your plan. If not, you should adjust the strategy to boost sales as soonest as you can. If entrepreneurs don’t know who the target is, how product or service is good for the target, how much the monthly expense is, and what is a short-term and long-term plan, they need to find the solution for those concerns before starting the business and organizing the plan.

2. Choose the wrong target group and don’t understand customer needs


That is the worst mistake. Marketing will fail if the target is wrong because advertising and public relations will be released in the wrong channels, content and promotion aren’t suitable for buyers. For example, children’s products are expensive but the target is set to unaffordable buyers.

3. Lack of marketing expertise

Don’t understand marketing well enough and try to make everyone like your products. In fact, not everyone will like the same product. You need to set your business in the right position and define a clear target. Customer needs and marketing strategies are challenging and tough. Many entrepreneurs often make mistakes about that. Some entrepreneurs claim that their products are excellent but there’s no marketing demand. Some make the wrong forecasts about marketing size or unreal demand or too little demand. A frequent example is to invest a big amount of money and rush manufacturing and stock products, expecting that the price will certainly rise in the near future. In fact, price drops because market demand shrinks so it leads to tremendous loss and bankruptcy.


4. Lack of knowledge and experience in the business

This is a factor that mostly found to ruin the business. Each industry has its own characteristic and it needs different perceptions in order to manage the business properly and efficiently. Another factor is how well entrepreneurs can drive strategic management as this is the most important qualification to set the proper direction for sustainable success.


5. Lack of capability to change

The changing of consumer behavior is the risk factor of business failure. The familiar example is the shopping behavior of Thai people who shift to online shopping more as it’s convenient, no need to travel, and they're a variety of products. Entrepreneurs who are still running the business in traditional ways and haven’t adjusted business in line with consumer behavior may face failure.


6. Accumulated loss

This can lead to bankruptcy whatever size your business is. That means the business faces loss every year due to several reasons such as entrepreneurs can’t adjust their businesses to the change of consumer behavior in time until the loss outweighs the costs.

7.  Lack of liquidity

This is a major cause of failure because the business regularly faces problems. If you don’t have sufficient credibility, your business will lose liquidity, and you may need a loan to pay your debt. Some entrepreneurs can’t get out of all debts and become bankrupt later.


8. Lack of delegation

This happens to most SME entrepreneurs who like to manage things on their own which leads to no progress, and that considered the negative behavior of almost all entrepreneurs. Even though they hire staff, they don’t trust them and believe that nobody can work better than them. Entrepreneurs should be more open and give a chance to those who are capable of assisting them. Be reminded that the most successful entrepreneurs can’t do it alone

8.  Lack of difference

The business will be at risk and fall into price-cutting competition with others until there’s no profit left. Selling the same items as competitors and follow the same marketing pattern is hard to create added value, to survive, and grow.


9.   Fail to build partners

Don’t think that you can do everything. Find well-matched partners to grow and survive together. Gathering business partners will keep the business strong, gain full support and enhance the skills of each individual.


10.  Overinvestment

This may depend on personal taste or preference from many angles. We shouldn’t invest in things that don’t generate sales to the business such as luxurious name cards, costly websites, off-target, and over-budget advertising. Overwhelming expansion of entrepreneurs is often found in investors who are in a high market growth situation, and demand outweighs manufacturing capability or circulating funds. Entrepreneurs don’t want to miss an opportunity and are certain that they’re able to manage and solve the problems. The business will lose its liquidity and then fail in the end. We call this phenomenon “Overtrading” which is normally found in SME entrepreneur groups.


11. Overexpansion

Entrepreneurs expand the business with a tremendous amount of money in permanent assets expecting that sales or business volume will be high enough and investment size is worth expanding. In fact, it’s contrary as the business volume doesn’t turn out as planned, or they're some unexpected reasons that cause market shrinkage so sales and profit go down. After that, they can’t make enough cash flow to return principle with interest for their loan money. Finally, the business gets stuck, closes down, and becomes bankrupt.


Many people dream of being an entrepreneur but the path to success is not a bed of roses. They need great effort, strong intention, well planning, vision, market and target understanding, and most importantly, marketing knowledge. SCB SME is ready to arm you with an array of pieces of training and offer a business credit line to support your business along the way. For more information, visit https://scbsme.scb.co.th/product


References

https://www.flyingcomma.com

www.nec.engr.tu.ac.th

https://www.facebook.com/notes/sehju-research-center