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True entrepreneurs can learn lessons in tough economy - funder

Oct 26 2019 15:02
Carin Smith

The current challenging economic conditions make it important for entrepreneurs to constantly evolve "to meet the climate of the day", according to Kumaran Padayachee, CEO of Spartan SME Finance.

In his view, the economic climate creates an environment for true entrepreneurs to survive by learning and evolving. He says the economic climate also impacts the important factor for entrepreneurship, namely funding.

"Even the funders - those established concerns who are willing to take a calculated risk at backing SMEs - are understandably sceptical, and a little more discerning about who they are entrusting funds to right now. This compounds the problem even further for SMEs who need working capital to grow," says Padayachee.

"There is a lot of distress in our economy at a micro level, making funders a bit jittery, which directly impacts the SME sector, making their job twice as hard to be able to strive ahead, navigate through these turbulent times, and find ways to grow during this period."

He advises entrepreneurs to focus on two things, namely the strength of your business model and secondly, how you apply yourself as "the jockey" or entrepreneur.

"SMEs require a strong business model to survive in this contracted economy and you have to be sharp about your target market. If you are dealing with the wrong target market or a segment that is over-crowded, this could cause a problem," says Padayachee.

"Equally, this applies to your product – if it is not the right fit or is under stress from competitors, or if your marketing is poor - you can't hope to thrive. When times are tough, people can be tempted to do the wrong things, or make hasty decisions – even when it's not the right time to be changing your business values."

He says an entrepreneur must do research well so that you don't apply to the wrong funder.

"The reality is that every funder specialises in different sectors and products – just like any normal business. It is important to find out what a funder’s specialisation is, what their funding criteria are, and then to make an informed decision as to whether your business is aligned and able to meet the funder's mandate," says Padayachee.

Also check whether your strategy and business model is still compelling enough to compete in a changed and tough economy.

Ask yourself some questions: are foreign imports threatening or improving your business model in terms of affordability and mass production; are you producing a commodity product or defensible product that sells as well as it used to; is your product or service still as unique - given the competitive nature of your sector? Have you harnessed smart technology to unlock efficiencies?

entrepreneurship  |  small business


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