Monday, December 06, 2010

Small businesses need to diversify

With the number of small businesses still far exceeding those who become successful, entrepreneurs are continuously looking for strategies to make businesses more profitable. From personal experience I know this can be very challenging especially in the early days and when starting a business and especially when struggling we often will take all the help we can get.

A recent study suggested that small businesses need to broaden the outlook and sell a more diversified range to a wider set of clients.
In an interesting bit of rsearch Loni Prinsloo from talks about the findings that points the way towards a more sucesfulbusiness:

SME Survey 2010’ principal researcher Arthur Goldstuck said on Monday that the first recession to hit South Africa in 17 years was instructive and showed that those companies which did not have all their “eggs in one basket” were the ones which weathered the storm more effectively.

“It goes to the reliability of the income stream and the health of the target market,” said Goldstuck.
“When one sector comes under pressure, it helps to have others to carry the business through tough times. Typically, however, if you serve corporations, you are likely to be more resilient and more profitable,” he added.

The survey, sponsored by the National Youth Development Agency (NYDA), showed that 39% of SMEs in established markets had typically done business with corporate customers, but only 31% of businesses in emerging markets had done business with corporate customers.
“There is a strong difference in diversity between established and emerging SMEs, especially in terms of corporate procurement.

“This presents an issue, since black empowerment legislation encourages sourcing from small business and in particular, from emerging small business. That could make a case for more intervention from government in terms of enforcing procurement policy,” said Goldstuck.

“We would like to see continued and accelerated participation from big business in supporting and developing emerging talent to achieve the capacity which is required by the procurement arms,” stated NYDA chairperson Andile Lungisa.

Resources permitting this may be a good idea but it will take time and effort to develop the wider product range and target the wider clients groups. As a lone entrepreneur especially it may be fairly challenging to get to this point but will be very useful as a future goal to work towards.

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