BUSINESS AND LIFE: Doing Business in Dominica: Part III

This week, we examine the challenges facing the small business sector and the strategies to overcome them.  The definition of small business varies according to country and industry. In some cases, it is defined by the number of employees, sales or profit.  Some countries use a combination of factors. In the Caribbean, there is no uniform definition, however, in a Dominican context, we can define a small business as any business employing less than fifteen persons.

Small business is seen as the engine for growth of any economy, however date reveals that a third to a half of small business will fail in the first five years.  This percentage may be higher for the Caribbean.  Welsh & White (HBR, July-Aug. 1981) argue that the fundamental reason for the failure of small business is “Resource Poverty”, and it is this condition, which separates small business from big business.  They go on to argue that it is a mistake to consider small business “little big business”.  When we examine further the reasons often touted for failure of small business, we will clearly see “resource poverty” as the inherent cause.

R G Stephens & Associates (Challenges of Managing a Small Business) identifies seven challenges of small business:
1.    Knowing your business – small business owners may know the rudiments of their business, however they lack information on the industry and the environmental factors affecting their business and industry.  Industry knowledge is critical for success.
2.    Knowing the basics of business management – small business owners have limited knowledge on the fundamentals of management, which includes planning, recordkeeping, accounting, production, scheduling, personnel management.
3.    Managing finances effectively – Cash is king and small businesses need to manage their liquidity.  Often accounts receivable is poorly managed, credit is difficult to obtain and when obtained, the interest rates are high and purchasing is suboptimal.
4.    Managing time efficiently – small business owners often feel stretched as they perform so many functions and there are many issues competing for their attention and action.
5.    Managing people – the key challenge is in attracting and recruiting the right staff.  This is due not only inability to compensate adequately but also often inability in selecting the right staff.  Small business owners also find it difficult to fire employees, even when they know that there is not a fit between the company and the employee
6.    Satisfying customers by providing high quality – Small businesses are challenged to set and maintain high standards, especially as the business grows.
7.    Knowing how to compete – One of the keys to business success is finding a niche and servicing that niche well.  Small business owners/managers are sometimes not aware of their competitive advantage and consequently make poor decisions.

The Meeting of Caribbean Small Business Entrepreneurs, Organisations and Agencies (2002) identified the following as key challenges:
1.    High costs of material
2.    Lack of information on the markets
3.    Lack of appropriate technology
4.    High costs of credit
5.    Lack of training in business management
6.    Sensitisation on regional and international issues relating to standards and quality.

A review of the two lists above (which are not exhaustive) reveal some of the same issues, and are well represented by Cheryl Hanson-Simpson (Why do Many Small Businesses Fail?), categorization of the challenges faced by Caribbean small business as inadequate knowledge, insufficient capital and inappropriate opportunity.  They speak to the “Resource Poverty”, identified by Welsh & White.

We look at some strategies to overcome the challenges faced by the small business:
1.    Information & Knowledge – Information is key to success.  Small business owners/managers must understand their business, industry and the world around them.  Subscription and reading industry journals, relevant books and keeping abreast with news development are some ways small business owners can obtain the information they need.
2.    Training – Attendance of formal and informal training and conferences are ways to gain knowledge, skills and competencies.  I particularly recommend the attendance at conferences as a key way in keeping on the cutting edge of one’s business.
3.    Visioning and Establishing Priorities – It is critical to have a vision of success for one’s business and to evaluate performance against the vision.  This facilitates the establishment of priorities; the business and strategic plans and provides the discipline and structure to make the decisions needed to achieve success.  The constant monitoring and evaluation against the vision also forestalls complacency and leads to creative and innovative ideas. These include new business ideas, streamlining of expenses, development of partnerships
4.    Development of Partnerships and Networking – Small business owners/managers are often afraid to share their ideas for fear of others stealing them.  While I do not recommend sharing your ideas with all and sundry, it is important to build a network of associates with whom one can discuss ideas and where applicable partner in the execution of these ideas,
5.    Managing People, Time and Resources – Small business should establish procedural manuals, codes of conduct, employee handbooks and other tools to provide the framework for managing the employees and resources.  Time management is important as there are so many competing things for the attention of the small business owner/manager, it is therefore useful to maintain “To Do List” and real time calendars
6.    Invest in appropriate technology – Appropriate technology is part of the toolkit for success, managing and leading effectively.
7.    Faith and Passion – Faith in God, yourself and your business as well as the passion, while often not mentioned are critical for success.  These intangible strategies are what keep you going when the going gets tough.  They provide the determination to find solutions and the perseverance to work through the difficulties.  They allow you to keep a “can do” and “winning” attitude even at your lowest; they allow you to not despair and not be discouraged even when disappointed.  They provide the inspiration and discipline needed to succeed. They provide the resilience needed to survive, especially in turbulent times.

George Dearing (6 Trends Reshaping Small Business, Forbes.com) sums it up well when he says, resilience will replace sustainability as the catch phrase for 2013, as business realise that adaptation is key to survival.  He quotes Andrew Zolli, “[A] new dialogue is emerging around a new idea, resilience: how to help vulnerable people, organisations and systems persist, perhaps even thrive, amid unforeseeable disruptions.  Where sustainability aims to put the world back in balance, resilience looks for ways to manage in an unbalanced world”.

Next week, we continue our series on “Doing Business in Dominica”.  Until we meet again, may God continue to keep us in the palm of His hands.

Valda Frederica Henry, VF Inc.’s CEO and Principal Trainer is a Chartered Financial Analyst (CFA), Certified Global Professional in Human Resources (GPHR), Certified Myers Briggs Type Indicator (MBTI) Practitioner, holds a PhD in Industrial Relations & Business, a Masters in Business Administration and a BSc Management Studies. VF Inc. is a Human Resource & Finance Consultancy firm with a Training and Recruitment arm, and the producer and host of a live TV program “The Cutting Edge of Business”.