The ABC of growing your SME

Mon, 24 Jul 2017 15:18:22 +0000

By DAVIS MULENGA

THE unemployment rate of more than 70 percent  is one of the key potential catalysts for Zambians to create Small and Medium Enterprises (SMEs). This would ultimately create employment and reduce poverty.

This is according to Todd Palmer, an influential global entrepreneur who illustrates a belief that failing more often is not a problem but a sturdy foundation for success.

Palmer, who recently delivered a guest lecture at the University of Africa, says Zambia is the right place for anyone to start and run a successful small business.

“Compared with the United States, being an entrepreneur here must be a matter of necessity and not an option,” Palmer says.

The fit between the University of Africa and Palmer is found in their core belief about empowerment.  Both believe that creating entrepreneurs would give Zambia the vigour and mindset that goes to the root of solving the many social and economic problems beset by the nation.

While the university could do its part of ensuring that budding business owners know more about finance, marketing, management and operations, the experience of Palmer in building a successful business and helping hundreds of start-ups turnaround their businesses would be invaluable.

According to Palmer, unemployment was a huge dividend as it undoubtedly, intuitively influenced many Zambians to start-up businesses. The unemployment dividend stems from the sheer pressure it placed on those who start the small businesses to succeed.

“What I have learnt during my short stay is that these small business owners in this country work far more as this was not an option.

“Indeed, the problem is not that owners of small businesses in this country don’t work hard, the problem is they might be doing the wrong work or the right work wrongly,” he says.

As a result many entrepreneurs fail. And the good news Palmer says, failing is part of the building process. He says businesses start and fail in the United States, too, at a staggering rate. Every year a million people in that country start a business of some sort and within five year’s more than 80 percent of them would have failed.

That is also true for Zambia.

Why is this so? The question is even more critical and significant for Zambians.

Palmer says it is about myths and ideas that people have taken to heart that these will give them the recipe to create extraordinarily exciting business ideas into success.

Years of experience in starting and running his own USD120 million company of providing specialised industrial skills have resulted into Palmer crystallising key myths about entrepreneurship. He says these myths inevitably lead to failure.

A good business idea will translate into a successful business is one myth you should ignore, says Palmer.

“Think that way, and you are more likely to join thousands of people who pour their energy and capital and life into starting a small business and fail.”

If your market information and data is limited, failure is also inevitable.

You will see the almost magical success is another myth one must ignore to succeed in running a successful small business.

Palmer learnt these lessons the hard way. After a few years of running Diversified Industrial Staffing (DIS), he woke up to a reality of USD600,000 debt and bankruptcy staring him in the face.

The lesson he learnt was that he had committed himself to believing that the huge contracts he was signing with his clients meant that the business was growing. It was only when he faced the financial predicament when he realised that the business ideas he had conceived needed to change.

After tearfully sacking all his staff, he had the unenviable task of convincing a bank he already owed US$600,000 to lend him US$1 million.

As the tailspin accelerated, Palmer hang on to his dear life, and convinced the bank to bail him out. In the frustrating and bewildering experience, Palmer learnt a new way of doing his business.

“First, I only counted a customer when they paid me and not when they signed a contract. Second, I had to put a margin on what was being paid. As an example if I was charging a customer US$12, about US$8 went to cover business costs and US$4 was profit,” Palmer says.

Palmer says his rebound was based on tolerance for failure.

So, when your fist instinct after failing is to pack up your bags, you have to look at Palmer to hang in there.