It is ironical how politicians keep saying that the small and medium-sized enterprises (SMEs) in Kenya are the greatest contributors to the economy when the sector hardly receives enough support.
Small businesses employ the majority of the population and they are responsible for countless innovations alongside the ultra-successful tech start-ups have proven over the past few years.
But in retrospect, small businesses are greatly disadvantaged compared to their counterparts, which is why many will argue that government policies only favor large firms.
Factors that Limit SME Growth
A large firm can easily sell its bonds or issue stock to the public if it needs to raise funds for a specific innovation or venture. The same cannot be said about small businesses. The flexibility lacks and they are much reliant on loans, which unfortunately aren’t forthcoming for many start-ups. This is still a big challenge to many small businesses across the country.
Growth in business hardly occurs without competitive talent. Sadly, small businesses don’t have the luxury of attracting top talents in the industry as a large enterprise would. Large firms hardly experience challenges when hiring high-level employees because they can afford them.
SMEs, in this case, might be challenged in the compensation sector but it sure does make up for it in terms of moving up the ladder quickly or benefits like flexible time among others. This is perhaps the only way the SMEs can attract skilled personnel who are looking for flexibility.
The advantages of economies of scale for a large business is higher than in SMEs, that is, the cost is lower for each product and service they offer. As such, they have a leg up on smaller business who will invest in tools and equipment or other services before having a finished product. Furthermore, SMEs will spend more time before delivering certain products or services.
For instance, if you wanted to build a table and you don’t have the tools, you have to buy the equipment first before starting the build; however, for your second table, because you already have the necessary equipment, you will spend less. This is why large businesses also produce in large quantities.
Small businesses are disadvantaged a lot when it comes to keeping costs low through negotiations. Depending on the volume of what your business outputs, you may or may not be in a position to strike admirable deals. As long as the profits are huge, the supplier can bend the
If a customer already has your brand in mind, they shop easily. This is often another segment where large enterprises hold the advantage. By the time SMEs have their brands out there, a lot will have gone to advertising and marketing campaigns. Big firm in fact, hardly does branding as extensively as they did when they were starting.
Be it as it may, that large enterprises are taking advantage of SMEs could or couldn’t be true. What people forget is that there are several bottlenecks that work against the growth of small businesses. These are the factors that keep them from succeeding.