SME or Start up
There is a recent trend and phrase where I come from that says: “SMEs are the solution to the Nigerian economic growth”. But the thing is that, I have always asked myself; “How true is that?”
First of all, I am not an economist, but I follow the business world a lot. I mean weirdly a lot. And due to my interest in the field, I have noticed some trends that contradicts many of such sayings.
I noticed there are two types of people in the world when it comes to business. Those that hates Cooperations and those that love them. Me I am in between. I like to see the good and bad part of everything. So here are some of my thoughts. Feel free to agree or disagree with me. After all its a free world. Everyone is entitled to their opinion.
Now, let define the terms. SMEs and Startups are usually used interchangeably especially at their easily stage because all of them starts small. But the thing is they are very different from each other. The difference is in their structure. Structure is the most important aspect of any business. How you structure your business will determine if its going to be successful or not. And how big it can become. A Small business is structured in such a way that its limited to be owned solely by the owner (usually the founder). It can employ a few people to help (usually below 10), but its not structured to grow beyond the owner. And for that there is no need for proper accounting and auditing, strategy, growth plan or business plan. Because the owner doesn’t have to be accountable to anyone (except in countries that take taxes very seriously. Especially European countries). A medium scale business goes a little further than a small business and can employ up to 100 people have some few assets, proper accounting and auditing, strategy, growth plan and business plan. But it is also structured in such a way that it doesn’t grow beyond the owner. It can have a few investors (usually family members and friends) and make a few millions in profits. Startups on the other hand are built entirely to scale. They have proper accounting and auditing, strategy, growth plan and business plan from the start. They usually grow beyond the founder (especially if the founder can’t keep up with its growth) and they usually generate at lease millions but subsequently billions in revenue in a couple of years after their lunch.
While SMEs are usually easy to start, Startups are reserved for the strong at heart. The are hard to start (most usually fails), capital intensive, and require too much work to get off the ground and grow. They are usually based on innovations and founders don’t know if there ideas are going to succeed or not. Another problem is funding. This is the reason many startups fail at a very early stage. The art of raising money and is so crucial in a Startup that a partner at YC once said that “raising money to a founder is not a skill but a NECESSITY”. This is one of the major reasons why most people are scared of starting their own businesses or just limit their businesses to SMEs. I will cover the different ways a startup can raise money in another article.
The product or service rendered doesn’t determine either the business is going to be a startup or SME but the founder usually determines this. Robert Kiyosaki once said: “There is nothing like a good business. There are only good entrepreneurs”. A good entrepreneur can convert any idea to a big business. All it takes is strategy and execution. The ability to raise money, the ability to build good teams, the ability to filter out good and bad ideas, and most importantly, Execution.
Any and every economy that embraces startups will succeed. Period. Just name them. California in the USA, New York in USA, London in UK, Beijing in China, Tel Aviv in Israel, Berlin in Germany, Moscow in Russia, Shanghai in China, Shenzhen in China, Lagos in Nigeria. Just to mention a few. Mostly of these country’s, cities’ or states’ economies depends largely on their startups, which later turns out to be big companies (Cooperations) making billions of dollars and directly employing thousands of people.
A country’s economy depends largely on the amount of another country’s wealth it can trap in it’s country. And its hard for SMEs to export their product and services to another country, but its easier for a startups to do that. Because it has lots of funding (if it doesn’t have enough, it can always raise more), more human capital and generally more resources to grow fast. Take Uber for example, it can expand into a country by just announcing its in the country and lifting up its restriction on the country and sometimes building some infrastructures that it needs to operate in the country such as payments and a physical presence. Things that takes a few thousand dollars and that’s it. But how hard is it for a taxi company in say New York to expand to say Nigeria. It will have to buy or rent cars, hire drivers, open up an office and lots more. That can cost a few million dollars. Or take for example; how much it’ll cost Facebook or any other (SaaS or Service company) to expend to Nigeria? Let me make it easier for you. $0.
In these competitive world where everything is going fast, countries have to follow the trend and move fast. The faster a countries startup ecosystem moves, the faster its economy grows, the faster its economy grows, the richer its citizens becomes. And the best part is, the richer its citizens become, the more its SMEs grows. SMEs rarely help a startup to grow, but startups always help SMEs to grow.
In conclusion, the fastest and easiest products or services to export are technology based or products and services that embraces technology.
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