Are you building a sustainable SME enterprise?

It is not easy to conceive a business idea and then successfully convert that idea into a successful business. A lot of work goes into creating a successful business enterprise, whether big or small.


How do bankers measure the success or otherwise of a business? What are the qualities of a sustainable and bankable SME business; one that will satisfy the criteria for a banker to even remotely consider it for financing? This question has no single or simple answer. This week we share a few perspectives on the qualities that make a small business venture, attractive not just to potential investors, but to bankers.

For a business to be attractive to lenders and investors, it must first be sustainable.


What is a sustainable business? To a banker, a sustainable business must meet the following basic criteria:

Firstly, the business must be easy to run and finance. Secondly, the business must be able to endure for a long time and it must be able to stand up to different kinds of problems that may arise.

Here are some important general guidelines on how you can make your small business project sustainable right from the start.

Always start small and grow from there

Starting small means that you leave yourself room to make some mistakes without risking everything from the beginning. It is always a good idea to test your ideas in the market first before plunging head, body and feet into the thick muddy and bloody waters of cutthroat business. Approaching business in this way will keep things manageable, until you get into the full swing of things. Starting small also means that the funding requirements of your business are small and manageable and it will be much easier for you to fund the start-up costs, even from your personal savings. You can then slowly grow the business, whilst exercising good control over its growth. Many small businesses fail, not because they are bad ideas but because they grow too fast! (See our recent discussion on “Overtrading Risks for SME Businesses”)

Keep things simple

Keep your business and your strategy simple right from the beginning. Nothing causes more problems faster for a small business, than trying to do too many complicated and difficult things in the beginning. It must not be overly complex. The business owner must understand the business thoroughly and be conversant with how it should run successfully. If the business owner is not sure or even confident about the business, he or she will find it difficult to convince an investor or a banker that they have an attractive business proposition. The enterprise owner must know the ins and outs of his business.
Have a clear and specific market need that you want your business to satisfy.
It is only by concentrating on specific market needs, be it a product or a service opportunities, that a business venture can succeed — and grow and achieve its true potential. As a business promoter, you must be absolutely clear on what you want your business to achieve. If you are vague about what you want to achieve, you’ll never achieve it.

Be totally committed to your business

You need complete faith in your business. You also need to commit your full energy, hard work and single-mindedness to get your business going and also to keep it going. Being a part-time, or a half- hearted enterprise owner means you will not pay sufficient attention to issues that affect your business.

Develop strong management abilities

Many, if not most, small businesses start from the heart but need to be run from the head. They, therefore, need to be managed just as effectively as any large business. However, most entrepreneurs do not invest the necessary time and effort in getting the skills required to successfully run a business. As a business person, you must have a basic appreciation of recordkeeping, customer care, marketing, communication, time-management etc before venturing into business.

Focus on long-term sustainability, and not on short-term income streams

This sounds ridiculously obvious, but most businesspeople miss this simple fact. A sound business will be as sound as the cash it generates over a long time. A business is not a business unless it pays for its own costs. (See our recent article on, “Basic Cashflow Management Techniques for SMES”). Your service or product may be urgently needed in the market, but if your income and sales do not exceed your “outgo” or expenses, you are going to end up in dire financial straits. A business that needs constant external financing to keep it going will not last. A sustainable business is one that generates enough cash to pay its running expenses over and over and over with relative ease. Such a business is attractive to banker to finance because cash inflows are sustainable and any loans have a reasonable assurance that they will be repaid.

Your business must satisfy a real market need and have a wide customer base

As already stated above, always be careful and be sure that there is a real and substantial market need for your business and for its products or services. Businesses based on fads, fashion, and luxury products or services frequently run into financial difficulties as soon as customer tastes change. In this respect, market research is critical for business success. You stand better to have a bigger market if you have products or services that are viewed as essential for everyday use. A sustainable business must build a strong and diverse “repeat customer base”. If your business has no clearly discernible and diverse customer base, then chances are, it is not a sustainable business.

l Clive Mphambela is a banker. He writes in his capacity as the advocacy officer for the Bankers’ Association of Zimbabwe. BAZ expressly invites players in the MSME sector and all other stakeholders to give their valuable comments and feedback related to this article to him on or on numbers 04-744686, 0772206913

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  2. Great advice!

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