Home' Trinidad and Tobago Guardian : April 27th 2017 Contents funds. Banks generally shy away
from business owners at this stage.
The poor cash position and the
fact the venture has little assets is
the issue. The business here can be
defined as a micro enterprise with
sales of less than $500,000, with
a few employees and assets of less
than $100,000. It may get to the
small size category, with sales of
up to $3 million and between six to
25 employees, with growth.
A business at this stage normally
has a strong family contribution.
Family enterprises are the domi-
nant form of business ownership.
Why? Well, they offer harmonious
families a way to work together and
pool their resources, creating sub-
stantial competitive advantage.
The venture owner is now
convinced that she has a worka-
ble business model and a defined
strategy to make money. The
business is sustainable and the
entrepreneur looks to move from
startup to scale up.
This next stage offers some dif-
ferent challenges, unlike the ear-
ly stage where business failure is
high, here the venture is probably
noticed by competitors and chal-
Having proven that the venture
is a money maker, the enterprise
owner looks to grow the business.
While it has positive cash flow and
some assets, financing is impor-
tant, but not the only issue.
The budding entrepreneur
looks for low cost ways to increase
sales-adding new products, get-
ting existing customers to buy
more and new customers. Word
starts to spread that this venture
has an innovative product or ser-
vice. The organisation is propelled
to the medium size with between
US$3m-50m in sales and 26-50
The business is now growing
rapidly, sometimes more than 30
per cent per year, a feat that larger
companies can only dream of. Why
is this so?
The short answer is that larger
organisations are bureaucratic,
slow in decision making and have
less tendency for innovative ways.
This medium-size organisation is
now becoming more formal, but
still is run by an entrepreneur who
believes deeply in patient capital.
Frequently family enterprises
invest with a long-term perspec-
tive, there is no push for quarterly
Therefore, the cost of capital
is much lower and this means
invested profits can potentially
earn more down the road.
The venture starts to slow down
as a medium sized organisation.
Grow rates are now single digit.
The founder faces a number of
new challenges. His love for the
business may hold it back and this
may reduce its entrepreneurial ad-
The past becomes more the
guiding beacon and what works
there will work in the future. The
next generation working in the
business may have some clashes
with the first generation over fu-
ture direction, use of technology
and investment in the business
versus personal withdrawals.
As the business matures, it has
no choice but become bureaucratic
to handle an increasingly greater
amount of work and the need for
Functional areas of marketing,
accounting, human resources and
other areas develop, while this di-
vision is to prevent chaos, it fre-
quently kills the entrepreneurial
spirit. The very thing that birthed
and grown the venture may ac-
count for its lower performance.
Decline or renewal
As humans, we age and die. As
the medium sized business reaches
its pinnacle, it is at the crossroads.
If the entrepreneurial spirit dies
or family issues over leadership
and succession increase, and the
founder chooses a monarch style,
the business starts a decline.
But unlike humans, organisa-
tions do not have to inevitably die.
They can continue into perpetui-
ty, across generations and become
Few have accomplished this as
many fail to adjust not only to in-
ternal issues but market changes.
There are some lessons from cen-
tennial companies. They have an
adaptive culture, remember the
past, but know the future does
not lie there. They work on their
succession plan and the current
leaders know when to exit and with
family businesses they know the
importance of legacy.
Sajjad Hamid is an SME & family
business adviser. His can contacted
via firstname.lastname@example.org or
BG18 | ENTREPRENOMICS
BUSINESS GUARDIAN guardian.co.tt APRIL 27 • 2017
Businesses, like humans,
go through stages or a
life cycle. While there
are some differences
with the analogy, there
is much value one can
derive from understanding the phases
that an SME (small- and medium-sized
enterprise) goes through.
If you are a business owner, it would
be nice to know what changes you need
to make to your management strategies
as the enterprise progresses or if you are
a supplier or a consultant, what sell-
ing or support initiatives the changing
venture would need. It's like a parent
pondering about what the needs will be
for a newborn, later as an adolescent,
mature person and a retiree.
Any wise parent knows needs change
with a child's age and different chal-
lenges that will arise as they progress
through the life cycle stages.
At this stage, the entrepreneur (as-
piring or budding) may have some event
that may trigger the need to start a busi-
ness. An employee may have lost her
job and be tired of the cubicle life or
the need to enjoy greater independence
(financial or otherwise).
While some may cry about losing
their jobs, the entrepreneur-thinking
individual ponders about what the fu-
ture holds with excitement, as they may
have spotted an opportunity.
First-time entrepreneurs do possess
some key characteristics which they will
use to take their ideas forward. At this
stage, it's similar to a couple who wants
to have a baby, they have a need to start
a family and appreciate the changes it
Aspiring entrepreneurs tend to be
moderate risk takers and feel quite
comfortable starting something new
despite the risks and uncertainty of a
new born business in an economically
The aspiring venture creator at this
stage ponders how can she make this
idea(s) into reality. She would do re-
search and work out some key aspects of
the business model. Ideas are just that,
but the budding entrepreneur knows
his ideas with commercial potential is
To separate ideas from business ide-
as, she works the numbers for each and
on paper completes a feasibility study.
After all, the successful entrepreneur
never falls in love with her 'baby' as a
parent would, she sorts through data
and makes sense out of it and continue
At this stage, the entrepreneur is nor-
mally using the strategy of boot strap-
ping---a technique that many use to test
a business idea with limited resources,
after all a startup is a business exper-
iment, the world is his laboratory and
has many variables to be considered,
He starts testing the business and
looks for feedback. Sometimes the un-
expected happens and the entrepreneur
finds out that his original idea was not
good, but there is a potential for some-
Common is for the entrepreneur to
go out and be the organisation's first
salesperson, a job that some hate, but
it will offer much insight into market
needs and future growth.
The new venture chugs along with
poor cash flow and the entrepreneur
uses his personal savings, some from
acquaintances or some from borrowed
Evolution of an SME
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