Reasons that cause SMEs to stumble
Published: 02:07 PM,Jul 24,2024 | EDITED : 06:07 PM,Jul 24,2024
The number of small and medium enterprises (SMEs) in the Sultanate of Oman continues to grow annually, with the Small and Medium Enterprises Development Authority registering a total of 135,064 units by the end of 2023, compared to 104,141 enterprises in 2022, marking a 30 per cent increase. The data also shows that the number of enterprises holding an entrepreneurship card totaled over 29,000 as of December 31, 2023, constituting 22 per cent of the total SMEs registered with the Authority.
Not all these enterprises operate efficiently or continuously succeed; some even face failure due to various reasons. This phenomenon of faltering is not unique to small enterprises in Oman but is observed worldwide. Although some small enterprises established in Oman and other Gulf countries are considered successful, some owners have failed to sustain them and have become debtors due to faltering operations and increasing bank indebtedness.
This issue needs to be addressed by promoting an investment culture among owners and incorporating relevant education in institutions, universities, and civil society organizations. Entrepreneurs and business owners must be aware of the principles required for starting and running such projects successfully. Experienced businessmen believe that entrepreneurs must persevere through challenges, acknowledging that failure is possible. They suggest that government institutions should guarantee financing operations for small enterprises to help them stabilize and expand.
Literature on these projects indicates several reasons for the failure of SMEs, including lack of capital. Establishing these projects often requires daily liquidity over long periods, necessitating cash to meet demands until the project is successfully established. A comprehensive business plan is essential, covering the organization's mission, strategy, financing, sales, marketing, financial expectations, and other elements. Institutions must also provide significant credit to customers, manage delays in payment processes, and negotiate cash flow effectively.
Small enterprises need to understand their market competitors, manage accounting matters, reduce spending, and adopt efficient work methods. Effective marketing is crucial to reach diverse customers, and avoiding poor administrative and leadership practices is essential. Continuous updates and improvements are necessary.
Omani entrepreneurs and others must ensure that the economic feasibility study of a project aligns with the intended work. They need to understand the challenges, opportunities, financial capabilities, and market conditions in terms of supply and demand. Continuous improvement of projects and products, attention to administrative and financial aspects, and the use of modern technologies to expedite operations are also important.
Haider Al Lawati
The author is a Muscat-based economic analyst who previously worked for CBO and OCCI.
Not all these enterprises operate efficiently or continuously succeed; some even face failure due to various reasons. This phenomenon of faltering is not unique to small enterprises in Oman but is observed worldwide. Although some small enterprises established in Oman and other Gulf countries are considered successful, some owners have failed to sustain them and have become debtors due to faltering operations and increasing bank indebtedness.
This issue needs to be addressed by promoting an investment culture among owners and incorporating relevant education in institutions, universities, and civil society organizations. Entrepreneurs and business owners must be aware of the principles required for starting and running such projects successfully. Experienced businessmen believe that entrepreneurs must persevere through challenges, acknowledging that failure is possible. They suggest that government institutions should guarantee financing operations for small enterprises to help them stabilize and expand.
Literature on these projects indicates several reasons for the failure of SMEs, including lack of capital. Establishing these projects often requires daily liquidity over long periods, necessitating cash to meet demands until the project is successfully established. A comprehensive business plan is essential, covering the organization's mission, strategy, financing, sales, marketing, financial expectations, and other elements. Institutions must also provide significant credit to customers, manage delays in payment processes, and negotiate cash flow effectively.
Small enterprises need to understand their market competitors, manage accounting matters, reduce spending, and adopt efficient work methods. Effective marketing is crucial to reach diverse customers, and avoiding poor administrative and leadership practices is essential. Continuous updates and improvements are necessary.
Omani entrepreneurs and others must ensure that the economic feasibility study of a project aligns with the intended work. They need to understand the challenges, opportunities, financial capabilities, and market conditions in terms of supply and demand. Continuous improvement of projects and products, attention to administrative and financial aspects, and the use of modern technologies to expedite operations are also important.
Haider Al Lawati
The author is a Muscat-based economic analyst who previously worked for CBO and OCCI.