So the best and the worst thing about small business can be customers – can’t live with ‘em but can’t live without ‘em. There’s either not enough of them or they are too demanding. But the customer is what it’s all about and SMEs should be able to run rings around the larger competition in dealing with them.
To prove that assertion, let me make a huge leap to Asia, because if you think finding and keeping profitmaking customers here is difficult, you haven’t tried doing business in a genuinely tough marketplace.
Sometimes uplifting news comes from strange places. The best piece of SME boosting I’ve seen in yonks has come from a ANZ-sponsored survey of 1000 companies about doing business in Asia.
Three things about the survey surprised me, though, upon reflection, one of them probably should not have.
The first surprise was that 20 per cent of small businesses have operations in the region with another 22 per cent thinking about it. That seems an extraordinarily high and encouraging number for a category of business defined as having turnover of between $250,000 and $5 million.
It compared with 39 per cent of medium companies (turnover of $5 million to $39 million) with operations there and 51 per cent of large (turnover $40 million to $500 million).
That worked out to an average of 35 per cent of the surveyed companies doing something in Asia – the region that is our future. And 47 per cent of those active in the region reported that revenue from their Asian operations was higher than from their domestic base.
Another surprise (the one that perhaps should not have been) is that the speed of achieving profits in Asia is in reverse proportion to the size of the company. Some 38 per cent of the small businesses reported achieving a satisfactory return on investment in Asia within 12 months, compared with 29 per cent for medium companies and 16 per cent for large.
Another 26 per cent of small businesses reported achieving satisfactory ROI in two-to- three years, compared with 30 per cent for medium businesses in that timeframe and 23 per cent for large. The peak time period for the bigger players hitting their straps was four-to-five years – 27 per cent.
Getting established in the Asian market is far from easy for reasons ranging from different laws and regulations to the language barrier and consumer preferences.
Because it is so hard, it was a huge surprise to me that nearly two-thirds of small companies were achieving satisfactory ROI within three years of starting.
Given the difficulties, I would have thought that bigger companies that have easier access to consultants and deeper pockets would have done better – but then I considered the fundamental difference between big and small companies: commitment.
It’s a big deal for a small company to have a crack at the Asian market.
While time and resources are limited for SMEs, when they are deployed there has to be close focus on their success. Within big companies, there’s more bureaucracy and other divisions to distract the top management.
For most big companies, a foray into Asia at least starts as a little sideline, something that can be carried by the rest of the business and that isn’t expected to shoot any lights out quickly.
For small companies, nothing is a sideline, everything has to perform and perform quickly to survive. That, plus the more agile nature of small business, means I shouldn’t have been surprised.
There is no better way to focus attention than out of necessity. If you’re going to have a crack at doing business with greater China (that was the case for 70 per cent of the surveyed companies active in Asia), it’s going to be a hands-on necessity to keep a close eye on progress and deal with any problems very quickly.
What’s more, SMEs are more likely to be privately owned and various other studies continue to show that private companies are more willing to invest in their business than publicly-listed corporations. The tend to have a longer time frame than the six-monthly or quarterly results needed to prop up the share price (and therefore the CEO’s bonus).
This survey was immensely uplifting for me, seeing that Australian business really is grabbing the regional opportunity and that it’s being led by SMEs.
And for much the same reasons that small businesses are succeeding quicker in Asia, they should have an advantage over the bigger competition in dealing with customers.
It’s that necessity thing again, plus the commitment of owners and their agility of the business to act quickly to reinforce success and deal with failure.
The bigger players may well have the advantage of scale to enable them to buy more cheaply, but they also have the disadvantage of size in having to manage that scale and inevitable bureaucracy that puts layers between the customer and the owner.
It may seem that there are almost as many strategies for dealing with customers as there are customers, from simple loyalty schemes (stamping those loyalty cards at the coffee shop) to social media and targeted advertising. Not all of them are right for any one business, but the ability to quickly develop and test ideas should mean a smart small business will find what works best of it quickly.
Right now we have plenty of examples of our biggest businesses getting bogged down in their customer relations.
Woolworths, the retail gorilla, is spending half a billion dollars on revamping its massive customer loyalty program.
The big banks have all, to a greater or lesser degree, damaged their customer relations.
The decision makers at the top tend to be a very long way above the reality of the individual customer relationship. That should be to your advantage. Use it.
Michael Pascoe is one of Australia’s most experienced and thoughtful business commentators with more than four decades in newspaper, broadcast and online journalism.