Planning - where SMEs meet Waterloo

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Bikky Khosla | 04 Sep, 2012
As a small entrepreneur, your are a man of action. You always like to be where action is. You are as busy as a bee. You can handle each and every operation of your business yourself without putting much effort. You are a born leader. Whenever in a crisis, you almost always act instinctively. All this sounds great, but why then so many small businesses fail every year? Do they lack these qualities!

Surveys conducted across the world -- time and again -- however, tell a different story. Most small and medium enterprises, despite their natural speed and agility, their ability to wear many hats and do "everything" themselves, and love for simplicity, fail largely because of one predominant reason -- they have a tendency to see planning as "overhead" -- something extra that consumes so much time and only complicates things. They ignore planning, and thus plan failure, as the saying goes.

First and foremost, there is no overall strategic planning. SME owners are often so much preoccupied with day-to-day and immediate issues that they lose sight of their ultimate objectives -- where they want to be in the distant future, what direction to follow, and how to reach that goal -- the vision and long-term planning. They just fail to move beyond operational planning, and as a result, more often than not, fail because of this missing element.

Lack of financial planning is another fatal mistake made by the average small business owner. Be it costing and control, budgeting, accounting, cash flow management, bank relation, capital allocation, risk management, investment or even planning for funding, many SMEs have a mistaken belief that financial planning is not something very important due to their small size.

Similar deficiencies are felt when it comes to SME marketing. A majority of our small entrepreneurs don't have the basic knowledge and skills to plan and manage their marketing activities. They lack adequate knowledge about advertising, promotion, pricing, selling, export-import, and so on. Worsening the situation, they usually run away from consultants and experts who are strong where they are weak.

Most of the small business owners tend to blame everyone else but themselves for their failures. They complain about lack of financing, faulty policies, inadequate subsidies, high input costs, poor infrastructure, and so on. Not an iota of doubt about these challenges, but at the same time there are many causes of failure which are more self-inflicted than the fault of the macroeconomic forces. Beyond doubt, lack of planning is one among them - and probably the single most responsible factor behind the horrific statistics of SME failures.