6 Key Success Factors for SMEs in Africa
Knowing the success factors for SMEs in Africa helps entrepreneurs know how to keep their businesses competitive. Starting and running a successful small, medium, and micro-enterprise in Africa is no easy feat. There are tons of factors that can directly or indirectly affect the forecast or objectives of your business. According to reports about 50% of startups in Africa fail to grow. This implies that one out of two SMEs in Africa fails to grow.
To help elevate this rate to favor SMEs, NGOs, private, and government institutions offer some form of training to business owners and their teams. However, this seems to have little impact on the success rate of these SMEs. Hence, bagging the question, “what does Africa SMEs need to be successful?”
In this post, we will take a quick look at 6 success factors for SMEs in Africa.
What are Key Success Factors for SMEs?
Key success factors are the same as strategic posture or competitive emphasis. They are the essential elements that a business needs to remain competitive in its target market. In other words, the key success factors in business highlight what your business should do to achieve the objectives in its strategic plan.
We can categorize the key success factors of SMEs into two groups namely financial and non-financial factors. The decisions your team makes about these factors will:
- Directly affect your competition concerning the profits they make.
- Affect the behavioral expectations of your team and employees.
- Highlight the behavioral requirements, skills, experience, and knowledge needed for your business to succeed.
- Affect the decision-making process of your execution plans. These includes manufacturing, marketing, equipment, organizational structure, etc.
Financial Success Factors
Financial success factors are factors that directly affect the financial capabilities of an SME. Here are some financial success factors for SMEs in Africa:
· Adequate Funding:
The number one reason why most SMEs in Africa fail is the inability to access adequate funding. Funds are necessary to ensure the success and growth of any business. Unfortunately, accessing funds is not so easy for business owners in Africa especially when you don’t know the right place to look.
Since there are very few business funding opportunities for SMEs in Africa, landing one is often highly competitive. However, adequately working on your business plan and strategy can give your business an edge. Hence, increasing your chances of accessing adequate funds for your business.
Business funding opportunities often come in form of loans or grants. While loans require you to refund (with interest) after a while, grants are more like gifts, you don’t need to refund. There are a variety of initiatives like the Tony Elemelu Foundation (TEF) program that offer grants to SMEs in Africa.
· Business Plan:
Aside from attracting and convincing investors to invest in your business, a business plan’s role in your business’ success cannot be over-emphasized. Your business plan helps you to understand the nature and potential of your business better. Beyond being an indicator that you are serious about your business, your business plan highlights the area of your business that you need to work on.
You can use your business plan to pitch your business ideas to show investors why putting their funds in your business is an opportunity that is too good to turn down. Furthermore, your business plan helps you develop a strong brand identity which in turn helps you to understand your competition better.
· Economic Conditions (Inflation):
Economic conditions such as inflation are one of the key factors that indirectly affect the growth or success of any business. Sometimes, a good business goal and strategic plans can be negatively or positively affected by high inflation such as the hike in the price of raw materials, electricity, etc.
Since these conditions are almost unpredictable, one of the strategies a business can use to stay afloat in such conditions is to keep funds saved for them. A scenario would be finding out that the price for leathers has gone after you’ve received orders from clients. Saving some funds can help you cover up for such inflation.
Non-Financial Success Factors
Non-financial success factors are factors that directly affect the success of your business and indirectly affect its financial capabilities. Here are some of them:
· Time Management:
Ever heard the popular saying, “time is money”? Nothing better portrays the truth when it comes to growing a successful business. One of the challenges SMEs face when it comes to time management is the lack of skilled and reliable employees to carry out specific business functions.
Having to spread overwhelming responsibilities across a thin list of employees affects efficiency. So, most SMEs in focus on the operation of the business, hence, leaving out other vital areas like marketing.
· Customer Service:
Building exceptional customer service is one of the key success factors for SMEs in Africa. Great customer service helps to create a memorable customer experience. Hence, increasing the chances that one-off buyers become loyal customers.
Exceptional customer service will also help your business to effectively connect with your clients. Hence, helping to build a strong customer community. It also helps to enhance product knowledge which in turn ensures more sales. Most importantly, exceptional customer service ensures prompt response to resolving issues and inquiries made by dissatisfied customers.
· Business Identity:
Experts suggest that the name of a business or brand may directly or indirectly affect its success. A unique brand name should be memorable and easy to pronounce. Most brand experts suggest that a brand name should not exceed two words and a maximum of three syllables.
After acquiring an exceptional brand name, the next thing you should do is formally register your business with your government. This indicates integrity and affirms to investors that they would be investing in a business that has come to stay if they choose to invest in yours.
There you have it for the success factors for SMEs in Africa. While running a successful SME requires hard work, paying attention to these factors increases your chances for success. If you have any questions, you can please drop them in the comments section below. Meanwhile, don’t forget to check out SME360 for other articles on business growth.