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I was by coincidence reviewing a newsletter issued by Kingston Smith. Kingston Smith is part of KS International, an accounting association of independent firms which KSi Malta forms part of. There was an interesting survey conducted by the UK government titled “2012 Small Business Survey”.

In my opinion, this is a very interesting survey and for sure owners of SMEs in Malta may learn a lot from it.

The Small Business Survey identified a number of factors to correlate significantly with growth among the SMEs it questioned, including, in order of importance:

  1. Exporting;
  2. Having a formal business plan;
  3. A willingness to seek external financing;
  4. A belief in the importance of formal training;
  5. The help of a business mentor.

Kingston Smith’s own study into the success factors for SMEs support these findings. From their own study it was found that the most successful SMEs in the UK held a number of common characteristics:

  • They are likely to use more than one source of finance  to start and sustain the business;
  • They are constantly thinking of new ways of doing things;
  • They believe that learning gives them a competitive edge;
  • They are more willing to seek external advice;
  • They proactively monitor cash flow and liquidity;
  • They are flexible enough to adapt to changing market conditions.

Maltese SMEs have, in my opinion, even more challenges than their UK counterparts. The local market is small and super competitive and there are not many ways how finance may be raised, nor a large selection of financial institutions. Local companies also have low gearing and they depend on the banks’ assistance to finance their operations.

In my opinion, however, local companies must follow the characteristics of the UK’s most successful SMEs. Those businesses which lack liquidity, do not monitor their cash flow constantly, lack good management, and are not flexible nor innovative in the short term, will surely find themselves in difficulty in the coming years. Maltese SMEs have to improve management structures, knowledge, and be very innovative in the areas they operate to survive. This is because operating costs in Malta will continue to rise due to the compliance and the complexity of today’s business environment.

Maltese businessmen must start thinking outside the box. They must look for new technology, diverse markets, using the web better, enter into joint ventures, send staff abroad to get more exposure and carry out market research before they go into any new business or market venture. They should also not be afraid to seek professional advice.

I believe that it would also help if the Government, through Malta Enterprise and similar agencies, studies how:

(a)    To assist Maltese SMEs to export their products;

(b)   To target assistance for Maltese companies which offer innovative products or services;

(c)    To assist in the pooling of resources and funding;

(d)   To enable companies and firms who are successful to contribute more towards our education system;

(e)   To improve assistance in Market research;

(f)     To establish some form of financial institution to provide risk capital.

We have to act fast as our manufacturing base is on the decline. We have to work hard to try to stop this decline and experience growth again in the manufacturing sector in the coming years. Furthermore, we have to make sure that we remain flexible, innovative and fast to adapt to market realities in all sectors including that of financial services. There is no other way other than to pool resources and forget politics to make this work.

 

This article was written by the Managing Partner of KSi Malta, Joseph Gauci, and published on The Malta Business Weekly on 17th July 2014.

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