SMEs - the problem with development capital in South Africa
SMEs - the problem with development capital in South Africa
Firstly they are slow to respond, with 6 months being the average waiting period to access the funding. As any entrepreneur will advise, too often the opportunity is long gone 6 months later. Entrepreneurship is about responding to market demand when it exists. Very few entrepreneurs are that far ahead of their competitors that time is not if consequence.
Secondly they insist on using traditional banking credit scoring methods to allocate funds. Most of these people will fail any traditional banking scoring system. Unfortunately bankers and accountants are in greater supply than people able to assess business plans, hence the focus on credit scoring.
In my humble opinion, the focus should be on the people and the business plan. Are they matched? Are they suitable for the intended business? Is the business in an appropriate sector? Is it in a growing sector? IS it within the government favoured sectors for future development and growth? Do they display a certain percentage of the indicators of an entrepreneur? Predicting entrepreneurial success is far from an exact science, but is that not the point of development capital? To develop entrepreneurs? To develop assessment skills?
We need to move away from the current stereotypes and find a new way forward, so that many more successful and growing businesses can be developed.
Rob Smorfitt
SMEs the problem with development capital in South Africa - To learn more about this author, visit Dr. Rob Smorfitt's Website.
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While I do not advocate that development capital should be handed out on an ad hoc basis, the current practice is also not working. Without exception, whenever the South African government makes development capital available for SME development, the caretakers of these funds generally fail in two ways.
Firstly they are slow to respond, with 6 months being the average waiting period to access the funding. As any entrepreneur will advise, too often the opportunity is long gone 6 months later. Entrepreneurship is about responding to market demand when it exists. Very few entrepreneurs are that far ahead of their competitors that time is not if consequence.
Secondly they insist on using traditional banking credit scoring methods to allocate funds. Most of these people will fail any traditional banking scoring system. Unfortunately bankers and accountants are in greater supply than people able to assess business plans, hence the focus on credit scoring.
In my humble opinion, the focus should be on the people and the business plan. Are they matched? Are they suitable for the intended business? Is the business in an appropriate sector? Is it in a growing sector? IS it within the government favoured sectors for future development and growth? Do they display a certain percentage of the indicators of an entrepreneur? Predicting entrepreneurial success is far from an exact science, but is that not the point of development capital? To develop entrepreneurs? To develop assessment skills?
We need to move away from the current stereotypes and find a new way forward, so that many more successful and growing businesses can be developed.
Rob Smorfitt
SMEs the problem with development capital in South Africa - To learn more about this author, visit Dr. Rob Smorfitt's Website.
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Dave KurlanDave Kurlan is the founder and CEO of Objective Management Group, Inc., the industry leader in sales assessments and sales force evaluations, and the CEO of David Kurlan & Associates, Inc., a consulting firm specializing in sales force development. Dave has been a top rated speaker at Inc. Magazine's Conference on Growing the Company, the Sales & Marketing Management Conference and the Gazelles Sales & Marketing Summit. He has been featured on radio and TV, including World Business Review with General Norman Schwarzkopf, in Inc. Magazine, Selling Power Magazine, Sales & Marketing Management Magazine and Incentive Magazine. He is the author of Mindless Selling and Baseline Selling – How to Become a Sales Superstar by Using What You Already Know about the Game of Baseball. He created and wrote STAR, a proprietary recruiting process for hiring great salespeople, and he writes Understanding the Sales Force, a popular business Blog and is a contributing author to The Death of 20th Century Selling and 101 Great Ways to Improve Your Life, Volume 2. - Visit Dave Kurlan's Website |
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