‘How SMEs can boost big busi­ness’

Finweek English Edition - - FRONT PAGE - By Ji­nine Botha

Over the past two cen­turies, en­trepreneurs have been re­spon­si­ble for in­no­va­tions that have changed the way peo­ple live their lives and con­duct their busi­ness. Ivan Ep­stein, CEO of Sage In­ter­na­tional, firmly be­lieves that en­trepreneur­ship is vi­tal to the econ­omy: “From elec­tric­ity and the tele­phone, to the in­ter­net and so­cial me­dia. Good ideas, in­no­va­tion and en­trepreneur­ship are what truly fuel the econ­omy.”

Ep­stein co-founded Soft­line – the com­pany that de­vel­oped home­grown ac­count­ing soft­ware prod­ucts such as Pas­tel and VIP Pay­roll – in 1988. Soft­line was ac­quired by multi­na­tional en­ter­prise soft­ware com­pany The Sage Group plc (Sage) in 2003.

Sage is the world’s third-largest sup­plier of en­ter­prise re­source plan­ning soft­ware (be­hind Oracle and SAP) and the largest sup­plier to small busi­nesses. It is listed on the Lon­don Stock Ex­change and is a con­stituent of the FTSE 100 In­dex, with a cur­rent mar­ket cap­i­tal­i­sa­tion of about £5.4bn (R114.7bn).

Ep­stein’s en­tre­pre­neur­ial dream of en­abling SMEs to grow took flight when Soft­line was ac­quired by Sage and be­came part of the group’s long and broad ex­pe­ri­ence in the realm of SME de­vel­op­ment.

In ad­di­tion to its range of soft­ware so­lu­tions, Sage pro­vides user train­ing to SMEs through its na­tional train­ing academy, and of­fers train­ing in gen­eral busi­ness skills, such as tax year-end com­pli­ance, ba­sic book­keep­ing and financial lit­er­acy as well as HR man­age­ment.

When Sage ac­quired Soft­line, Ep­stein was ap­pointed CEO and to­day he heads up Sage’s busi­nesses across Africa, Aus­tralia, the Mid­dle East and Asia – all re­gions that in­clude some of the world’s fastest-grow­ing mar­kets for busi­ness so­lu­tions.

Start­ing small

Be­fore this mas­sive suc­cess, Ep­stein ex­pe­ri­enced the tri­als and tribu­la­tions of run­ning his own busi­ness with Soft­line.

Though most be­lieve the com­bi­na­tion of a con­tract­ing GDP, the volatile rand, ris­ing in­fla­tion and ris­ing in­ter­est rates make it in­cred­i­bly tough to run a small busi­ness, Ep­stein be­lieves th­ese tough eco­nomic times should not de­ter en­trepreneurs.

Global En­trepreneur­ship Mon­i­tor re­search shows that small busi­nesses are sig­nif­i­cant con­trib­u­tors to 50%job cre­ation, cre­at­ing of all em­ploy­ment op­por­tu­ni­ties in South Africa.

“Of­ten great things are done in times of hard­ship. Re­ces­sion­ary times, for me, are of­ten the best times to start a busi­ness, be­cause of all the op­por­tu­ni­ties that open up. When things go well in an econ­omy and prof­its rise, it can of­ten be tougher to get started. I re­mem­ber build­ing my busi­ness [Soft­line] dur­ing the re­ces­sion of the 1990s and the tough times did not stop us. We found ways to keep our busi­ness afloat. This some­times meant that I had to work full-time to sup­port my start-up, but when the eco­nomic tide turned we were es­tab­lished and reaped the ben­e­fits of our per­se­ver­ance.”

Even to­day Ep­stein be­lieves in run­ning large multi­na­tional Sage as he did his small busi­ness.

“I al­ways say, de­spite how big we get or how much money we make, we should al­ways op­er­ate a large busi­ness with the heart of a small one; with the same drive, am­bi­tion, tenac­ity, ur­gency and hunger to achieve and in­no­vate.” Ep­stein also be­lieves com­pany cul­ture is im­por­tant: “If you can take em­ploy­ees with you on your jour­ney, and you en­gage the right peo­ple, your busi­ness will take care of the cus­tomers’ needs.”

Ep­stein’s own ex­pe­ri­ence as an en­trepreneur has en­abled him to hire peo­ple with the same pas­sion that strive to make cus­tomers’ lives eas­ier, al­low­ing them to fo­cus on grow­ing their busi­nesses.

Back­ing SMEs

Global En­trepreneur­ship Mon­i­tor re­search shows that small busi­nesses are sig­nif­i­cant con­trib­u­tors to job cre­ation, cre­at­ing 50% of all em­ploy­ment op­por­tu­ni­ties in South Africa. Cur­rently, the SME sec­tor ac­counts for more than 45% of the coun­try’s gross GDP.

“So if we con­sider th­ese num­bers and in­crease the quan­tity of SMEs in any given coun­try, the nee­dle of eco­nomic growth will move in a pos­i­tive di­rec­tion,” in­sists Ep­stein.

Even gov­ern­ment ad­mits that with­out the growth of small busi­nesses, the goals set by the Na­tional De­vel­op­ment Plan (NDP) will not be reached. The NDP en­vis­ages that 90% of the 11m jobs tar­geted by 2030 will come from the SME sec­tor. Deputy min­is­ter of small busi­ness de­vel­op­ment, El­iz­a­beth Thabethe, re­cently said that it “is crit­i­cal that both the pri­vate and pub­lic sec­tor avail op­por­tu­ni­ties for small to medium en­ter­prises so as to arm them to tackle the high un­em­ploy­ment we are fac­ing as a coun­try, and help cre­ate the jobs that our peo­ple need”. Ep­stein says it’s im­por­tant for busi­nesses – es­pe­cially ones like Sage that have vast amounts of data on how SMEs func­tion, as well as the knowl­edge of what they need to grow – to work with gov­ern­ment to cre­ate a thriv­ing SME sec­tor.

“Large busi­nesses have a huge amount to gain through a more ag­gres­sive fo­cus on the de­vel­op­ment of the SME seg­ment,” adds Ep­stein. “A stronger SME sec­tor gives big busi­ness ac­cess to more cus­tomers, sup­pli­ers, deal­ers and out­sourc­ing long-term part­ners. From the pub­lic per­spec­tive, an in­crease in healthy SMEs means more em­ploy­ment, a wider tax base and gen­eral pros­per­ity i.e. a more sta­ble so­cial en­vi­ron­ment and a health­ier econ­omy. This is the ideal con­text for large busi­nesses to op­er­ate in,” ex­plains Ep­stein.

Ac­cord­ing to him, a help­ing hand from large busi­ness and/ or gov­ern­ment can make the dif­fer­ence be­tween even­tual suc­cess and fail­ure for SMEs, es­pe­cially in their early years. “Th­ese are the times when cash flow is tight, and when the busi­ness is vul­ner­a­ble, re­gard­less of its longterm po­ten­tial,” he says.

“Big busi­nesses and gov­ern­ment agen­cies can be incredible cus­tomers and part­ners for SMEs, if the re­la­tion­ship pays at­ten­tion to their real needs and chal­lenges. Our ex­pe­ri­ence at Sage is that ac­tive sup­port al­lows the SME to grow. The op­po­site, sadly, is also true. SMEs that don’t re­ceive ac­tive sup­port of­ten just wither and cease to ex­ist.”

Ep­stein be­lieves a lot more can be done in terms of boost­ing the SME sec­tor, from some­thing as sim­ple as pay­ing an SME timeously, rather than at 60 days, to in­vest­ing in men­tor­ing and ed­u­ca­tion and re­search pro­grammes. He is pas­sion­ate about this and be­lieves busi­ness men­tor­ing can make all the dif­fer­ence, “since most SMEs don’t have the HR, le­gal, mar­ket­ing and tax­a­tion skills and resources that larger com­pa­nies do”.

A re­cent sur­vey by PwC found that ac­cess to mar­kets, fund­ing and rev­enue gen­er­a­tion were seen as the three most sig­nif­i­cant com­mer­cial chal­lenges faced by SMEs in the past 12 months. Ep­stein says that en­trepreneurs should per­se­vere when times are tough be­cause of­ten they give up with­out re­al­is­ing how close they are to suc­cess.

That said, recog­nis­ing the im­por­tance of SMEs, and of­fer­ing “the right kind of sup­port from gov­ern­ment and busi­ness could spark a sig­nif­i­cant change in the tra­jec­tory of the lo­cal econ­omy as a whole”, con­cludes Ep­stein.

“The right kind of sup­port from gov­ern­ment and busi­ness could spark a sig­nif­i­cant change in the tra­jec­tory of the lo­cal econ­omy as a whole.”

Ivan Ep­stein CEO of Sage In­ter­na­tional

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