Good Morning again, David Elliott here. I ’d like just to share a few thoughts with you about why some SMEs (Small Medium Enterprises) prosper whereas others remain stuck in a sort of rut, which can be a sales turnover which is neither satisfying nor helpful.

Why should this be? Well, there are thankfully a lot of people looking at this area because SMEs are vitally important to the UK economy – they are major employers and major engines of growth. So, why do these things happen? Well you can imagine that when you start a company you’ve got an idea, you’ve a belief, you’ve got a dream and really you just want to get on with it, and this leads to a lack of planning in the company, it means that basically the company is just doing things, so it doesn’t really think through what it is doing and often this lack of planning can leave a very shaky foundation to the company. The foundations will always be non-resistant to things like a recession, things like a depression, things like a change in the economy etc. etc. , so that’s not really very helpful. Often the company hasn’t really thought through things I’ve talked about elsewhere and that hasn’t really organised what it is that makes the company different, so it doesn’t really have a USP.

So the company is on shaky foundations, it doesn’t really have a USP, and it muddles through. It muddles through through energy and commitment and nobody ever really denies that people in small companies work tremendously hard, but unfortunately often in the words of Harvey Jones, they can be “busy fools” – busy with the wrong things. Busy with “pushing water uphill” and not really giving the customer what they want in a way that the customer will appreciate. So they’re rushing around, and that pure enthusiasm can lead to initial momentum, but that momentum is difficult to maintain.
Cranfield University is very, very heavily involved with SMEs and has an enormous amount of very useful information. So I think that often businessmen that have reached this point should consider taking a little bit of time out and going to their local university and picking up additional skills. This then will force the company to delegate a little bit of additional responsibility. Certainly those companies that seem to prosper do invest in their staff, in their training, and the guy at the top starts to remove himself a little bit from the “engine room”.

So, if the boss of a SME knows that he is still doing everything that he did when he first joined the company then perhaps he has not learned how to delegate. So these are some of the areas worth considering.
Also, there’s a very interesting finding from Cranfield again, which teased out over a number of years that the fact that those businessmen that were generating superior profits were an unusual combination of people who were prepared to take a risk, but also knew their own limitations. So you can imagine somebody who gambles, because that’s essentially what taking a risk is, although it can be based on intuitive understanding of the environment and situation, but if that’s combined with a feckless disregard for what he knows and doesn’t know, it can be a recipe for disaster. If, however, there isn’t a sense of risk implicit in the business it’s unlikely to move beyond the mundane. So it requires a very special characteristic and it’s probably very useful to consider your own attitudes against this sort of backcloth. Hopefully these tips are useful and I look forward to talking to some of you in more detail later.

Thank you very much.