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How SMEs can run a sustainable business

Small businesses failure rates can be very high. It is estimated that between 10 and 20 per cent of start-ups do not survive their first year and another 10 to 20 per cent do not survive their second.

Having a sustainable business model can boost your chance of long-term success. At HSBC, we have seen many small businesses grow and thrive, and these businesses share many common characteristics. With a sustainability plan, we’ve seen some of our SME customers expand from small firms with just a few members to enterprises with over a thousand employees.

Get and keep the right people Success starts with the business owner. Do you have a strong sense of entrepreneurship? Entrepreneurship comprises a strong sense of responsibility and appropriate risk appetite. If you don’t think you have that entrepreneurial quality, work with someone who does and leverage those qualities. You can still run a successful business by establishing a strategic partnership with another company or hiring someone who is entrepreneurial. At the same time, you need to be prepared to share the success with them.

Having good staff is another crucial factor. Not only should you hire people with the right skills, but provide training and development opportunities to help people grow with the business. Employees also need reasonable pay and rewards to enhance their sense of belonging. It is cheaper and easier to keep good people than to be continually searching for new employees.

Set up good corporate governance No matter how small your business, you need good corporate governance. Corporate governance is the set of processes, customs, policies, laws and institutions that determine how a business operates. Though it may sound like a subject for big corporations only, corporate governance is relevant to SMEs to a certain extent. For example, all corporations should implement guidelines and mechanisms on everything from pricing to delegation of authority to ensure staff understand expectations and are accountable for their actions.

these duties to your staff? If not, your company may lack good corporate governance. I once asked a friend who owns a small business how he was able to trust that his sales staff could take care of negotiations with their buyers, and if he had any concerns that his staff might make careless decisions that could cost the company. My friend pointed out that he outlined the best pricing and payment terms staff can offer and the minimum profit margin that they should achieve, so they understand what they need to do. He added that his staff is aware that they share not only the success but also the failures of the business, so they’re motivated to strive for the best outcomes. With good corporate governance practices in place, business owners can delegate daily operational activities with confidence to employees, so they can focus on business plans and the long-term development of the company.

Before coming up with their business plans, small business owners should have a thorough analysis and understanding of the market and how it is linked to their own business. There are a number of tools and books that SMEs will find helpful in understanding their market positions. The SWOT analysis is my favourite strategic planning tool used to evaluate a business’s strengths and weaknesses as well as market opportunities and threats. This doesn’t just have to be done before doing your first business plan – it’s useful to do an ongoing basis as the business grows and the market changes.

Make use of external resources “I’m just a small business and don’t have any clout.” “We have to rely on ourselves for everything.” Small business owners often feel isolated and overlooked. But SMEs form the backbone of economy: they account for 95 to 99 per cent the business population, depending on the country. How could they be neglected? There is a range of government bodies and quasi-governmental institutions that offer a lot of support to SMEs. Small business owners can also benefit from learning from each other. The best way to do this is to join trade associations and chambers of commerce. Besides organising networking activities, the associations host seminars for their members to enhance their understanding of their industries, the market and latest regulations.

How do you run your business? Are you always the one negotiating with buyers or checking the goods from suppliers when they arrive? Do you feel comfortable delegating

Small business owners should also use professionals such as accountants, solicitors and tax consultants. SMEs should make use of every opportunity to exchange ideas with these professionals in order to have a clearer picture of the economy and relevant

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