Is Funding to Blame for Failure?

Is Funding to Blame for Failure?

The lack of adequate funding resources available to small and medium enterprises (SMEs) is often cited as the leading reason for their failure. However, funding is not the fundamental issue, but rather a side effect of a greater problem facing the SME sector and the corporates supporting it.


Consider a 12-year-old who dreams of conducting the New York Philharmonic Orchestra. Attaining this goal requires training, ongoing dedication and hard work: the same elements that ensure success for an SME. Successful businesses are built over a period of 10 years, although most SMEs do not survive the first year. The key to success is to keep training, honing skills and developing new methods.

Broad skills required

Similar to the 12-year-old who requires practical and theoretical knowledge in order to succeed, the SME requires a broad skills base. However, unlike the child, no single person is able to attain the broad business skills base alone. Incubator and acceleration programmes provide a platform for the entrepreneur to become the conductor of the SME. These programmes allow for skills sharing, mentoring and advice from "serial entrepreneurs”, as well as the identification of potential blind spots in the business plan or strategy.

The child would not be able to attend the required music lessons, purchase the correct instrument or reading materials without sufficient funding. For an SME, capital is crucial, yet many SMEs are denied funding due to a lack of research, a narrow skill set and an inability to prove that their ideas are unique.

Understand weaknesses

Through the funding application process, SMEs can also learn about the weaknesses in their application and business, and develop ways to fix them. Funders often see businesses fail and understand the common root cause, which can offer invaluable learnings to SMEs.

Build the team

The driving force of an SME is not the idea, but the team behind the idea. Entrepreneurs often remain hinged to one concept, yet business is fluid and ever-changing. The idea that SMEs start with may not be the one that leads to long-term success.

Corporates also have a role to play in the development of a strong SME sector. Enterprise and Supplier Development (ESD) is one of the most valuable and attainable of the B-BBEE pillars.

However, successful ESD initiatives are dependent on effective fund management. Corporates and SMEs should look to a specialist fund management team who are proficient in building, sustaining and leading a business to greater levels of success.

Date of Publication: 30 November 2015

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