SME owners that have been running their business for 5 years to a decade, apply strategic planning on their daily operations 69 percent of the time.
WYLDE International, a Kenyan-based consulting firm that equips and empowers small and medium-sized enterprises, on July 22nd, launched the WYLDE SME Strategy Pulse Report detailing the role of strategy in unlocking growth for SMEs.
The report provides an in-depth outlook on how entrepreneurs understand the concept of strategy, its implementation, and the difference it makes, particularly now many businesses are reeling on the back of the COVID-19 pandemic.
It based its findings on the recently released 2021 SME Performance Report, which analyzed 126 SMEs across 15 sectors in Nairobi by applying various parameters including Business finance scenarios and overall performance for the said businesses. It also covered the role the government has played in supporting SMEs.
Of the total number of businesses surveyed, 36 percent of them have been operating for between 2 and 5 years, and up to 65 percent operate below the 2-million-shilling revenue category. Only 3 percent of these SMEs operate with a turnover value of over 100 million.
Furthermore, all the businesses with the highest-grossing revenues – over 100 million shillings – had a strategic plan in place guiding their business operations. Most of these businesses with a strategy have been in operation for between 5 and 10 years.
However, the concept of strategy among these businesses is not universal. While some believe that strategy is planning and implementation, others argue it in terms of action. Then some are convinced that strategy is a process.
Although the WYLDE SME Strategy Pulse report established that the annual turnover does not appear to be a result of a good strategy, it is worth noting that 55 percent of those operating below 2 million shillings have an existing strategy. Sadly, about 1 percent do not have a clue on what a strategy is.
Regarding how often the SMEs with an existing plan undertake a strategy, 67 percent of those operating for not more than a year do so in three months. Consequently, only 58 percent of businesses whose revenue is less than 2 million shillings undertook business planning exercises in the previous 3 months.
One of the key objectives of the survey was to determine the influence of strategic planning on decision-making. Based on the age of the business, a total of 67 percent of high revenue businesses rely a great deal on their business strategic plans for their daily decision making.
In comparison, SME owners that have been running their business for 5 years to a decade, apply strategic planning on their daily operations 69 percent of the time.
The regular focus areas for applying regular strategic planning include business growth, sales growth, and new market opportunities with the percentage of participants standing at 13 percent, 11 percent, and 10 percent, respectively.
Meanwhile, as relatively new businesses don’t believe in the value of working with experts, the more seasoned SMEs have involved external facilitators in their strategic direction. On the same note, a specific category of SMEs, those with an annual turnover of between 5.1 and 10 million shillings entirely believe in working experts for the best results.
From these stats, it is clear that many SMEs don’t prioritize strategic planning. But on the upside, most of them agree that it is the key to building resilience.
That notwithstanding, SMEs need to continue to leverage digital tools to retain visibility and relevance to existing clients and retain strategies that limit expenses to essential spending. Additionally, investing in the expansion of business activities, taking advantage of new opportunities identified both during and post COVID-19, are other sound recommendations for scaling growth. WYLDE International also recommends conducting regular strategic planning exercises and taking advantage of external facilitators as they bring both experience and objectivity.