Advice to my favourite SME: Listen to the bed bug (2)

My favourite SME, I have a feeling that you didn’t quite like some of the things I said last week. I would like to take the liberty to elaborate briefly. Perhaps, you may see that some of the issues I raised, which you think are controversial or elementary, may actually be settled advanced level issues in regard to your business growth. I asked you to try and fix your looks because as you dress so you are addressed. I hope you did not mistake this to mean a reference to the window dressing you do about your offices and their furnishing. I was talking about things you do to be an effective small business in the eyes of your bankers, in particular, and your customers in general.

There are certain things people look out for in order to take a company seriously. It is not the lavish office facilities. While office accommodation is important, because a fixed and respectable address in good, it is not as critical as having behind you a structure that gets things done. You need a bank behind you but it can only do so if it trusts you. How does a bank get to know and trust you? As an entity, you must have an identity that inspires people to do business with you. This is why I said you should begin to think of yourself as a proper company. A proper company has an identity of its own. It distinguishes itself from its owners and gives hope of continuity. There is nothing wrong with a company having a key man, provided the risk associated with it can be mitigated appropriately.

The first evidence of blurred distinction between the company and its key man is the way the finances are managed. Who writes the cheques of your company and who signs them? Can any cheque be written if the key man is out of town? Is there a separation of the company’s finances from those of the key man or are they intertwined? Your bank will be more forthcoming to deal with you if they can see a dividing line between your finances and those of the key man or promoter. How much record keeping do you engage in? I bet there is no record of some of the biggest transactions you have done, beyond the movements in the bank balances. This is so because you do not have the culture of writing things down. Record keeping helps your institutional memory – that collective set of facts, concepts, experiences and knowledge held by your people. It enhances in-house staff development and promotes transparency, which your banker always wants to see in your dealings.

I wanted to know if you have a bank account. Am sure you thought that was a dumb question because you must have opened one from day one of your existence. Well, it is not as stupid as it sounds. A bank account is not just where you save your money. It is your passport to bank support, including free advice. This is why I asked if you have ever met your Account Officer – the person responsible for your account in the bank. I hope you know that every bank customer has a bank staff positioned to take care of his needs? You are probably aware of the high rejection rate recorded across banks for loan requests from MSMEs like you – averaging over 60 percent. One of the reasons for the high rejection rate is that most of you see the bank as a store for your money. You interact more with the ATM than your banker who does not know you. He cannot take risk on you.

You should learn to sell your business ideas to your bank. The first thing to do in this regard is to engage your account officer to educate him on what you do. Banks have the capacity to understand what you are doing, if you let them in. Unless your bank understands what you are doing, it cannot advise you properly nor stake its funds on you. Be warned that many account officers are neither technical nor entrepreneurial. They know little about certain business activities of yours and do not have the presence of mind to explore. They are quick to throw out your idea if you don’t engage them but they are smart enough to grasp your ideas if you take them through.

Let me tell you about a concept called Design Thinking. When you fail to see yourself as a proper company and conduct yourself as one, many things go wrong. First, you act randomly and leave no learning points, and have no systematic way of dealing with future problems. This deprives you of the opportunity to build capacity. Design Thinking is a concept, which has an engineering origin but now applied in business. It involves using customer feedback information and prototyping to create products or services that meet customers’ needs. You must begin to create your own Blue Ocean as you are unlikely to survive in the oceans already red with the blood of casualties of the corporate battlefield. Creating new solutions – Blue Oceans – based on the proper use of customer information is vital for your future survival – another reason for record-keeping, not limited to financial records.

Lest I forget, I said you should listen to the bed bug and hear what the crafty creature said to its family at a time akin to this recession. An Igbo mythology on perseverance tells of the battle and survival strategies of the bed bug when his entire family faced destruction by the house owner. The bug and his wife got into a household and began to multiply rapidly, feeding on the blood of members of the household. In a short time, the whole house was filled with bed bugs crawling out in the dead of night to suck the blood of the household. Every effort to get rid of them failed until the household decided to pour hot water on every suspected hideout of the bugs. The father bug summoned its family to discuss the situation and marshal out survival strategies.

In summary, the bug gave the following rules to his family: “1) Never allow the hot water to engulf you. Try to run away even if you are wounded. A wounded bug is better than one floating on hot water. 2) There is always a safe place to hide. It may be hard work finding it but just find it. It is laziness, and not hard work, that kills. 3) Be patient and endure the pain, if you are unlucky to get touched by the hot water. As a kid, this same calamity visited my father’s family and he told us to be patient and that whatever is hot today will be cold tomorrow. You, my children, are the evidence of the truth in his advice”.

My favourite SME, listen to the bed bug. The foregoing suggests that a recession may not be a death sentence. Even if it is one, it is a suspended sentence. You have not yet been taken to the gallows. It may, like hot water, bring pain and distress, but it could be an opportunity to rethink strategies and migrate to areas yet unsoaked by hot water. Look for those areas. Innovate. Many businesses are known to have blossomed – after a recession-induced encystment – when hot water becomes cold. Listen to the bed bug. In spite of the current pains, we must begin to think of how to scale up our businesses after the recession. This should be our next point of discussion.

Dr Emeka Osuji, Author of Microfinance and Economic Activity: Breaking the Poverty Chain is Senior Fellow, School of Management and Social Sciences, Pan Atlantic University.