In a recent edition of the CPA Ireland official magazine, Accountancy Plus, Joe Carr identified six key success factors to support SMEs to reach the bar of superior performance and to stand out from the crowd.
Maintain a sharp focus
Be clear on your target position and have a clear understanding of the dynamics and changes that happen in your industry. For some SMEs that want to maintain a sharp focus, this will mean hard choices, particularly for those that have not taken a long term and strategic approach to markets and market position.
Bring more to the party
For some SMEs, the operating model is still very traditional. It is based on a simple shop, service, trade or profession with very little value added through brand, technology and unique ‘know how’. For SMEs to compete and succeed into the future, they will need to bring more value to what they do. Competition is increasing through greater globalisation and the growing application of smart strategies by leading SMEs.
Build resilience and financial discipline
Some SMEs appear to be naturally cautious, some are open and neutral, while others have taken on borrowing with what appears, in hindsight, to be reckless abandon. With many SMEs certain important aspects of the company’s affairs, for example: financial discipline, a resilient balance sheet, a sustainable funding plan and tight working capital management, were in many cases never formally managed or monitored prior to the crisis. Such lessons emerging from the crisis must not only be learned but also hard coded into practice for future generations.
Right Sizing your company
Rather than simply bigger being better, the more useful lesson is to “right-size” your organisation. If a company is staying small, it needs to ensure it maintains a niche focus and that it is deeply rooted in supply chains and the wider ecosystem to ensure the benefits of critical mass can be leveraged. This may involve outsourcing non-core activities and developing strong partnerships with others as an alternative to internal organic growth. SMEs must ensure that they are linked to important sectoral clusters and ecosystems to enhance value chains and remain abreast of sectoral innovations and best practice.
Increase international outlook and extend the geographic footprint
SMEs should consider extending their footprints to ensure sustainability and improve competitiveness. The extension of geographic remit for most small businesses may be far from opening overseas offices but rather rooted in better deployment of technology to enhance international marketing and sales, linking into industry clusters including state support for growth and internationalisation. Many more SMEs will have to work through the identified barriers to internationalisation or they might find international competition coming to them instead.
Manage for today and lead for tomorrow
This is a very difficult but crucial balancing act. Some of the key characteristics that help to achieve this include:
Long term orientation – long term approach to business planning.
Risk based planning - cautious risk based approach to opportunities
Competitive focus - strong desire to be the best and compete at a high level internationally
Core business focus - strong clarity on market position and focus on quality of product offering
Financial discipline – financial management strongly integrated with business planning and risk management, a considered non-speculative approach combined with strong control over fundamentals including tight working capital management
Read More: http://www.cpaireland.ie/members/publications/accountancy-plus