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Roadmap for Growth [SME Advisor Middle East](SME Advisor Middle East Via Acquire Media NewsEdge) Via a series of ambitious support programmes, the UAE is committed not only to the growth of the SME sector as such, but to helping individual businesses develop to the maximum extent. The reality is that growth in this sector makes good commercial sense – and it's a goal that has the backing of major financial entities such as National Bank of Abu Dhabi (NBAD). SME Advisor looks at the growth paradigm and the sector that are now strongly motivating Emirati-led businesses… For almost a decade, leading economies around the world have looked increasingly to the SME sector as the one area able to deliver volatile growth, at a time when traditional industries and enterprise-level businesses are often looking tired and past their best. Part of the programme for delivering this growth has been a commitment to building leadership and entrepreneurial skills in the sector, along with a better understanding of the financial priorities that were typically the preserve of larger operations. Emerging economies such as the UAE are no exception: a variety of government-led initiatives have not only targeted the role of SMEs in building a vibrant and diversified economy, but looked specifically at how imperative it is to raise awareness of this sector and its career benefits specifically amongst the Emirati workforce. Already, entities such as the Khalifa Fund for Enterprise Management and Dubai SME are helping create a 'new era' amongst Emiratis, breaking the traditional assumptions that their future lay automatically in the public sector, by painting an altogether broader and more appealing picture of the rewards of private sector entrepreneurship. With SMEs accounting for more than 92 per cent of all businesses in the UAE, they presently deliver a little more than 62 per cent of GDP. These statistics indicate that their growth curve will benefit substantially from the critical efficiencies that larger businesses are able to deliver – and suggest that many SMEs are still marketing and selling at the level of a 'corner shop', rather than as companies leveraging the benefits of international trade or entering into the public/private sector partnerships so successfully pioneered as a commercial template here in the GCC (and facilitated, for example, by the work of the Khalifa Fund Gateway programme). Hence, a focus on achieving growth and the means to acquiring the skillsets able to deliver it. The new generation of Emirati entrepreneurs, presently the focus of the government-led initiatives, will play an important role in securing that transition in the medium term. Why growth is fundamental to survival Growth, for SMEs, isn't simply a 'nice to have', or a by-product of adopting the more sophisticated management techniques of big business. It's actually a key requisite of survival. Sixty years ago, the great economist, John Maynard Keynes, showed that the index of survival for any business was the formula 'performance = scale of profit ÷ by inflation + the dominant trend in cost of living'. Since the cost of living typically rises by 45 per cent every decade, any business has a clear choice: grow or go bust. There is also the fact that while a small business may be able to be more agile and nimble than its larger cousins, the sheer economies of scale and cashflow dictate that too small can be perilously close to extinction. There is the added challenge that many of the business owners who might otherwise run reasonably solid SMEs simply don't have the training to handle (or for that matter, to apply for) the levels of funding that a fast rate of growth can often require, especially once the business has hit a plateau at the all-important third and fourth year stage. Encouraging businesses to press on with a structured growth path is very much the focus of the government initiatives such as the Khalifa Fund and Dubai SME, as well as the nation's more proactive financial institutions – NBAD is a clear example. Growth strategies for Emirati SMEs While much of the media focus inevitably tends to be on the role of the start-up (the legend being that this is where we are more likely to find 'pure' entrepreneurship), the more important – and immediate – commercial gains are more likely to be made by encouraging already-successful businesses to grow. So, entities such as the Khalifa Fund and Dubai SME have developed a range of initiatives designed specifically to leverage growth, whether by teaching the requisite operational skills – such as accountancy, marketing, business administration – or by making available the right market intelligence to encourage expansion, either into fresh markets, or via new product development. The Khalifa Fund for Enterprise Development, for example, has established its strategy based on three main 'pillars', two of which are very much focused on the growth and long-term development/sustenance of already-proven SMEs. While the first pillar is all about spreading an innovative and entrepreneurial spirit amongst the community (and equipping Emiratis with an entrepreneurial mindset), pillars two and three look at: Providing financial support to SMEs, fast-tracking development via six unique funding programmes. There are a remarkable number of success stories already generated by this approach, especially in terms of proven business 'turnarounds'. Creating a supportive and optimal environment to enable the growth, prosperity and sustainability of Emirati-led SMEs. Perhaps more widely known is the way that the Khalifa Fund also reaches out to SMEs via the hands-on assistance provided by its specialist division, 'SME Toolkit'. The main purpose of the SME Toolkit is to act as a resource for all UAE entrepreneurs who are interested in either setting-up a new business venture or expanding their existing business. A project of the International Finance Corporation, a member of the World Bank Group, the SME Toolkit offers free business management information and training for SMEs on: Accounting and finance Business planning Human resources (HR) Marketing and sales Operations, and information technology (IT). Again, the abiding idea here is showing businesses how to capitalize on their existing strengths and deliver the critical abilities and skillsets necessary to 'go for growth'. To achieve this, very helpfully, the SME Toolkit offers a wide range of how-to articles, business forms, free business software, online training, self-assessment exercises, quizzes, videos and resources to help entrepreneurs, business owners, and managers in emerging markets and developing countries to start, finance, formalize, and grow their businesses. Within the context of the UAE, the SME Toolkit provides a powerful catalyst for change in terms of the raw materials that Emirati business owners can use to leverage critical growth where and when it's needed most. HE Abdullah Al Darmaki, CEO, Khalifa Fund, identifies this growth perspective when he says: "Khalifa Fund's services range from fee exemptions, priority in government purchasing, participation in national and international trade shows and events, as well as receiving ongoing guidance and support to access new markets and thus enable SMEs to better grow." The role of the Government in creating a conducive growth platform for SMEs: the Dubai initiative While in many ways acting in parallel with the raft of objectives demonstrated by the Khalifa Fund, Dubai SME has developed a somewhat broader demographic focus, by encompassing the aims and aspirations of expat-run SMEs, not purely those founded and led by Emiratis. Its flagship initiative, Dubai SME 100, is the epitome of this approach, complementing the core spectrum of activities designed to foster growth in locally-run SMEs. These core activities (where we see an equal focus between start-up incentivisation and a commitment to mid-term development) include: An in-depth review of Equity Financing relationships for SMEs, and their advantages and disadvantages. An 'accreditation' programme for Dubai-based angel investors (which is seen not purely in terms of start-ups, but rather, as an ongoing source of finance and Board-level expertise). A business Valuation and 'value-drivers' programme. A Mentorship programme designed to match mentoring needs with the company's respective level of development. A 'Be Bankable' initiative which aims to coach the ability for SMEs to 'self-assess' their readiness for bank finance, as well as provide the expertise to make realistic and highly-documented finance applications. It will also aim to give SME owners/directors the ability to negotiate the best-suited finance options, as well as direct them towards qualified auditors able to provide authenticated annual accounts. In addition, a declared objective for 2015 is a move towards educating investors about opportunities in the SME space, with an emphasis towards accelerating those businesses already on a growth trajectory and explaining the benefits to be accrued from investment in an established concern. The banking perspective: helping develop established Emirati SMEs While a good deal of attention is often focused on the apparent 'disconnect' between start-ups and the availability of risk finance from banks, considerably fewer column inches are given to the very healthy and vibrant relationship between banks and established SMEs committed to growth. The reality is that, for a number of the leading banks, this is one of the principal areas of commercial activity and there are a wide range of products and services dedicated specifically to helping SMEs get the very best from their primary growth phases – indeed, these products can effectively be the catalyst enabling that growth to happen in the first place. In the case of NBAD, for example, there is a clear commitment to helping Emirati-led SMEs deliver the best possible growth potential, via a raft of products and services tailored to have their needs uppermost in mind. For example, many of the products that are generally grouped under the heading 'Trade Finance' in fact exist specifically in order to supercharge growth by liberating cashflow and freeing-up fresh investment capital. Classic financial instruments of this kind include Letters of Credit, Factoring, Cheque and Invoice Discounting and Trade Credit Insurance. This is quite aside, of course, from the larger area of secondary and tertiary finance initiatives, whereby the established Emirati SME can unleash fresh resources to, eg, leverage market expansion, invest in leading-edge product development, or lay the foundations for the creation of a world-class branch network. Another important dimension of this relationship is the way that a financial institution of this standing can initiate bespoke conversations with its Emirati SME customers, with a view to fully understanding individual needs and current financial priorities. Armed with this data, it can then purpose-design and offer a highly customized product mix. This level of tailored service – matching expertise to aspirations and sourcing the financial instruments to accelerate the business plan – complements the efforts we're seeing from the public sector, and provides the Roadmap for Growth on the journey from SME to Enterprise. (c) 2014 Corporate Publishing International. 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