Small and medium sized companies are the growth generators for economies worldwide, the frequent incubators of ideas and inventions, and the basis of the U.S. economy. Ninety percent of new jobs in the U.S. are generated through small and medium sized (SME) enterprises. Most businesses fall into this category. Therefore, governments (federal, state, and local) are interested in helping to make us successful. Big business also is interested in SMEs because of the ideas and technology they generate. Many large businesses grow from the acquisition of smaller firms. So it’s natural to ask whether the existing services and businesses that purport to help SMEs do an adequate job and how they might do it better.

SMEs are characterized by their focus -- what is particularly important to them -- and by the style and preferences of the entrepreneurial owners. So, what is important to SMEs?

First, cash flow. If you don’t know what cash flow is, then you have never run a business. There is no question in any small business owner’s mind that cash flow is the key to success. If you don’t keep your eye on the cash -- not the financial statement, the cash (as in how much came in today and what amount went out today and this week and this month) -- then you won’t be in business very long. In this environment where businesses live and die by cash flow, budgets are created as guidelines and are made to be broken. Because it is too hard to predict cash flow most small businesses don’t operate on a real budget. You cannot say, with certainty, that you are going to get a payment from any particular client by any certain date. Big business and government are particularly slow to pay. So, you operate on projected budgets or on educated expectations or predications.

Second, mission. You must keep your eye on the ball and on the mission of the company. It is very easy to get distracted by other issues. You need to keep the company focused on its mission, its goals and its objectives. Distractions usually are very interesting -- and very costly. The company’s driving force and raison d’être must remain flexible to meet the demands of the marketplace as well as to keep within the bounds of the original mission.

Lastly, anyone hoping to help SMEs must keep in mind that most are run by entrepreneurs. Entrepreneurs need to be treated a little differently. There is a lot written about them. Some people think I‘m one, so I’ll just relate to you what I think their characteristics are, good and bad.

Entrepreneurs are:

• Idea generators. If you’re in a room with a group of entrepreneurs, the ideas flow freely and in abundance.

• Stubborn and tenacious. If you are going to retain your focus in the face of bad cash flow and keep your eye on the ball, then you have to be both stubborn and tenacious.

• Impatient. You’ll often see entrepreneurs tapping their feet and pacing around in the back of the room because they just want to "get on with it".

• Risk-takers. They will tell you "Well, let’s try it!" They are not status-quo people. They do not follow the party line. They ask questions. They tend to march to a different drummer.

• Initiators. They definitely start things.

• Performers. Because they are stubborn, they generally finish what they start.

Psychological studies show that entrepreneurs share other common traits that are well documented and can be read in the literature. For instance, they generally are first-born and they have had to deal with some sort of adversity in their youth.

Entrepreneurs also:

• Are somewhat rebellious or, depending on your point of view, impulsive;

• Do not color inside the lines and tend to think ‘outside the box’;

• Tend to see things with a different point of view; and,

• Quite frequently are dyslexic, upside-down thinkers. So, not all learning disabilities are all bad.

Let’s take a look at the most common types of help offered to the small and medium sized enterprises by those organizations that are set up to help them.

• Real estate agents are always willing to show and to let space to businesses of any size and kind.

• Banks make loans to SMEs.

• The Small Business Administration and similar state and local groups provide lists of contacts for advice or marketing.

• Franchisers and others spew out a multitude of advertisements of business opportunities. You know the ad -- "You, too, working out of your home, can make a zillion dollars." Even the Web has them coming across the line these days.

• Governments and trade associations offer trade missions through which you will meet important government officials of other countries.

There are sometimes wage and tax incentives.

All this isn’t nearly as good as it sounds.

The advice that is available for SMEs is canned. It is pre-packaged. It is "one size fits all".

The promised introductions are actually just lists of people for whom you leave voice mail when you call. Frequently, these are very long lists of unknown people. The agencies often create them based on printed checklists that the small business owner fills out. Without introductions contacting someone on the list is just a cold call, like the ones you get at dinnertime. Hosted small lunches would be much more effective.

The trade missions are at your expense, of course, and those wage and tax incentives are usually matching funds and never ‘free money’. In most instances, it’s big business that can take advantage of the tax incentives, not the SMEs

Any help that is offered often requires the SME to prepare an elaborate business plan, which, like their budgets, will bear little resemblance to reality. Small businesses, as a rule, don’t create business plans for internal consumption since their environmental factors change so frequently that they can’t follow them for very long.

And the help is hardly free. Even as SME owners go through the convoluted processes required to request assistance, they often don’t know if they are going to wind up at a tollgate at the end. Also, it takes a long time to get the paperwork through. There are a lot of bureaucratic response channels. The procedures required by these agencies and businesses are difficult for everyone, but particularly so for entrepreneurs and SMEs. Response time to applications or requests is slow -- typically 6-8 weeks. All this labor costs a lot of money. It’s an expensive undertaking.

Suppose you grit your teeth and do all the paperwork, what then?

For loans, leases, credit cards or a line of credit, you need to pledge all of your personal possessions: your house, your bank accounts, your car -- your children unto the third generation. You also have to turn over all of your personal financials and, if you’re one of those stubborn, tenacious entrepreneur-types, you’re not too pleased about people getting into your private life. This issue, alone, stops many people from going forward.

In sum, the problems begin when people who always have worked within the governmental bureaucracies or within big business try to help groups that they really do not understand on either an emotional or a business level. Not only have many people in these organizations never worked in a small business but their college courses were taught by professors who never worked in that environment. Their reality is not ours.

Let’s look at two examples of the problems: first at how contacts really work and second at the bureaucracy surrounding minority set-asides.

Contacts in the Real World. Figure 1 shows a page of an actual standard list put out by the Small Business Administration in Albuquerque. It says in one place that you should meet with all the people on this list. The list is seven pages long. One entry, for instance, directs us to a certain person at Phillips Lab at Kirtland Air Force Base from whom we can get a list of their procurement directors. There are also contact people at DOE, Sandia Labs, etc. Many times, if you call the people listed, they will refer you to someone else.

One of the items on the list leads to a web page (Figure 2). Here’s the Procurement Assistance Jump Station, a very proactive term. Sounds good. However, 8 clicks later, when we finally reach an actual bid opportunity that looks interesting, we run into "Login required:". You have to be tenacious to use these systems!

Minority Set-Asides. Another example of what happens within entrepreneurship is the SBA category called the 8A Set-Aside. If you are a woman-owned business or American Indian -- and I am both -- or another minority group, you can apply to file for an 8A Set-Aside. The owner meeting the criteria has to own or control at least 51% of the business. So, in our case we got the paperwork, completed it, and submitted it. The first time we submitted the SBA told us that the ranks were full, and they didn’t need additional small businesses as Set-Asides. So, we waited a couple of years and went through the entire process again. This time the response was that we had to have the forms filled out by someone who knew how to do it. It would cost us only $3,000 to get the stamp of approval by such an organization.

The message is that, being one of those "dumb" groups that can qualify for an 8A Set-Aside designation, we are obviously not qualified to fill out the forms. So, we didn’t do it. People periodically ask me why we are not an 8A company. That’s why!

What kinds of help would owners of SMEs really like to be provided?

First of all, we need

A confidante: a listener, a sounding board.

REAL contacts. Not a relay race that takes us to contacts or forms that get us to the next person who may or may not be the right person (and quite often is not the right person). We need someone who or something that provides a procedure that introduces us to these contacts. "Can we get together on a conference call to this person?" "Would you go with me to meet them and tell them that I am a good person?" Real contacts are people with whom you can make a deal. Now, this is why everybody does marketing -- to identify, over time, some real contacts for possible sales, possible leads.

• We want a podium to explain a product -- a deal-making session or something similar -- so that you can find out about other people who are doing similar things with whom you might be able to joint venture. It’s the same as if you were sending in a grant proposal. You might want someone to joint venture and you want to know who might be interested.

• Practical advice on banking, legal restrictions, what you can and cannot do, regulations, etc. But you want them targeted to your type of business, to your situation.

• Advice as a discussion, not a lecture. Advice that hits a particular space; advice that fills a particular blank that you need filled in the business. You want it to really help. You don’t want documentation or verbiage that are pro-forma fillers -- that look or sound beautiful but, in reality, are useless in application. NOT ad copy posing as documentation, which is what a lot of these organizations (particularly the agencies) do. NOT spending time online or on the Web in some kind of labyrinth to nowhere.

• A line of credit instead of investment money that takes a portion of the business.

• Investment -- but only when the time is right. Not too early, when your plan is still forming and not too late, but when your enthusiasm for the product or service is still high. This is a difficult balance to achieve because small businesses are usually short on cash and they are usually short on marketing contacts, especially when they are just starting up.

• Joint ventures -- where the new partner brings marketing contacts and cash. That’s what SMEs are short on. They’re very big on determination. They possess many character attributes and strengths. They really need marketing and cash.

• Marketing and contacts -- Release of products to market once the development is done requires a marketing plan and a different type of contacts from those you needed initially. This is a crucial shift in the business life cycle.

I reiterate that, by and large, what works for big companies does not work for small companies. People in small business need immediate help; they cannot wait a year-and-a-half. They need help that is forthcoming within a couple of months or less. Owners of SMEs need immediate help before the cash that they have disappears and they are hanging on by a thread. This happens all too frequently to small businesses. Most of those that go under, go under because they didn’t get cash in the timeframe it was needed. Maybe they weren’t supposed to. There’s the element of survival of the fittest here.

They need help before the "lookers" (organizations and investment bankers who are investigating the company), lose interest and go onto something else, which frequently happens. Many of the "lookers" do a lot of browsing. They dangle attractive possibilities in front of small businesses. The SME owner just knows that guy will call him back, but he doesn’t ... and time runs out.

Entrepreneurs need to be handled in a very proactive manner, not a bureaucratic manner. Handing them a pile of forms to fill out is enough to make them say, "I’m out of here. I don’t want to deal with that."

So, in summary,

• Target advice

• Shorten the timelines

• Give real information

• Monitor when possible.

That will help the SMEs.

Marjorie M.K. Hlava, President and Chairman
Access Innovations, Inc.
P.O. Box 8640
Albuquerque, NM 87198-8640
(505) 256-1080
Email: mhlava@accessinn.com