Small- and medium-sized enterprises (SME’s) are seen as a panacea to South Africa’s growing unemployment. The National Development Plan forecasts that 90% of the 11m new jobs will come from the SME sector by 2030. However, research data shows that this may not be the case. According to a World Bank study on employment growth in SA during the period of 2010 – 2019, the average job growth from the private sector during this period was only 2.3%. However, the SME sector’s share of this new jobs growth in the private sector was disappointingly low. Therefore, it appears that SME’s may not be able to create the required new jobs by 2030.
SME’s are also expected to contribute significantly to the country’s GDP as approximately 95% of businesses consist of SME’s, like in other countries. The National Development Plan forecast that by 2030, SMEs will contribute 60% to 80% of the GDP. In contrast, SME’s actual contribution to GDP in SA is disproportionately low, according to research data. This situation is as a result of the exceptionally high failure rate of SME’s. Between 70% – 80% of SME’s do not survive passed the first 5 years. Amongst the key reasons cited for this high failure rate is the lack of appropriate business skills and knowledge, according to a survey report of The SA Institute of Chartered Accountants.
SME’s must build and sharpen their business skills and knowledge in order to increase their chances of success and create long term value for its stakeholders. Planning must become part of the arsenal of skills to enable SME’s to succeed. Most successful businesses work according to a plan. A plan gives direction. A plan can be referred to in cases of uncertainty and disagreements. A plan is necessary to ensure there is coordination amongst functions and teams. A plan is used to measure progress as business performances must be periodically measured against the business plan. A plan prevents workers and senior managers from running around like headless chickens when a crisis arises. A plan instils confidence in the stakeholders of the business. A plan helps a business to improve its competitive position. A plan is also used to raise capital, funding and credit from investors, financial institutions and suppliers. A plan has many other advantages.
However, achieving planned goals and objectives require discipline. Plans must be rigorously implemented in order to achieve the desired outcomes. Many businesses have detailed plans but fail to successfully implement these plans. Without disciplined implementation, these plans may not produce the desired outcomes.
A business plan must be reviewed and updated on a regular basis or when conditions change significantly and rapidly. All other plans, projects, programs and activities that are linked to the business plan must be reviewed, updated and/or changed accordingly. Resources required to implement the revised business plan must be reconsidered, reprioritised, and reallocated. Therefore, outdated plans may not help SME’s to survive and grow sustainably.
The Covid-19 pandemic and lockdown have decimated many businesses especially SME’s. This business interruption has created new ways of doing business. New digital technologies and remote working have become the new norm of business. Business models have become outdated. Customers and clients also require new and better experiences from the new technologies. Therefore, businesses must review their plans in order to stay relevant. Businesses must go back to the drawing board in order to survive and grow. The future of businesses must be reimagined and rebuilt. However, SME’s cannot reimagine their future and rebuilt the business without an existing, credible business plan.
Ultimately, SME’s who fail to plan, plan to fail. Learning planning skills and using such planning skills may go a long way in enabling SME’s to improve performances, accelerate growth and create sustainable long-term value for its stakeholders.
About Bethanie Management Consulting
Bethanie Management Consulting are professional accountants and trusted business and financial advisors. The firm enables businesses to improve performances, accelerate growth and create sustainable long-term value. We assist businesses to develop and implement business plans, craft new business strategies and develop and implement operational plans.
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Please call us at 011 042 9768 or 072 296 1281 (Virgil). Or chat to us on WhatsApp. You can also email us at  virgil@bethanieconsulting.co.za. Or you may contact us by completing our online form for a call back.