SMEs should amalgamate

smaller you are, the more disadvantaged you become.

Margins The biggest challenge is having the same overheards, but margins dropping significantly.

How do you sustain your business if you don't scale up your operations? This affects smaller operations. A price conscious consumer is on the rise. Bargain hunters have literally littered the market. With the advent of information technology and willingness to share market information the customer is so well informed and is making real-time well informed decisions based on his financial capacity.

Big Tenders Tenders are getting bigger and more sophisticated, so how do SMEs come to the party? The funds required are big not to mention the expertise. It is advisable to form a consortium and bid on these big projects but still remain as individual SMEs.

It's like bringing all different expertise under one roof to augment existing competences. It's a numbers game. It's the reason most tenders are won by talents without the community they are being implemented in.

Big Orders SMEs are found wanting when it comes to satisfying big orders because of lack of capacity.

If there were to join forces, they create enough capacity to meet customer requirements and it will be happy days.

Customers are looking for big to maximise on resources.

Economies of scale The smaller you are, the more costly your business model is.

This implies your products/services are not being competitive even though you are conveniently located to customers.

Purchasing raw materials/products in bulk reduces the cost of each product and that can be extended to customers through relatively lower prices.

Imagine manufacturing/procuring as a team but selling as individuals that is cost effective.

The advantages of grouping to minimise costs is an avenue that will open bigger markets that ordinarily individual SMEs would not have dreamt about.

The artificial capacity created is what is needed for a competitive edge of not just mere survival.

There has been backward and forward integration by big wholesalers/producers thus they have brought products/ services to the customer's doorstep and price has become a competitive edge.

Even marketing can be done as a group to the would-be customers thus enjoying a lower cost of products/services awareness to the market than trying to do as an individual and compromise on depth, scope and reach of the initiative.

Crowd Funding Funding SMEs has been costly on the small amounts. It's starting not to make financial sense to be funding small operations because it's cumbersome. On the same costs you make more money on bigger amounts than on now orders their small amounts. Raising funds as a group minimises the costs of funding. As a team it's easy to raise funds for individual operations than each individual going it on their own.

Customer ring fencing A smaller customer base is a huge risk in sustaining a business.

Limited service provision due to being small is dangerous when customer dynamics change and SMEs are bound to realise less revenues.

SMEs coming together create a good customer base that could be loyal due to being religiously served accordingly.

This could lead to areas of specialisation where each SMEs sells only products/services they have a competitive advantage.

This is unlike the situation we have right now, where everyone is selling everything literally everywhere leading to gnashing of teeth in marketing. It's the reason we talk of "witchcraft” on the SMEs market because competition between players is fierce and survival at all cost becomes key.

This leads to elimination of players in whatever way possible due to same product range at one coordinate.

Coming together also deters other new entrants as you would have increased the barrier to entry to your business by increasing cost of doing business to new entrants.

In addition, you can always turn down their application to join the amalgamated grouping to safeguard your profits in the game.

Policy Advocacy A lone voice smacks of annoyance than voice of reason. Democracy is about majority. Speaking as a group of interested parties give more credence to the issues being lobbied for.

The more people speak out, the more noise and the more they could be heard as opposed to lone voice in a little corner where even if you scream it's not loud enough before it reaches the necessary ears. .

Now is the time to get bigger, scale operations and enjoy the benefits. The market is changing, the economy is threatening upside potential.

The time is now before it is too late, seeing small is no longer strategic nor a competitive edge as it is an inconvenience.

A new breed of customers which is no longer financially ignorant has emerged and is now putting value to their hard earned money and are thus looking for value for their money.

This new breed has brought in a new dynamic on the market place physical or virtual.

Change in market dynamics is managed now before tangible change is experienced as when that happens it would be too late to take a strategic position.

See opportunities now where others eventually see, and you are a winner. All SME businesses need to consider amalgamation now than never before.

Please note Indian SMEs are relatively bigger institutions in terms of assets, capital (human included), markets, influence, they think globally but acting locally, revenue base and are operating in a totally different environment to our unique Zimbabwean scenario.

Amalgamation and keeping it local has power to it and forget the tower light syndrome.

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Morris Mpala is the managing director of Mob Capital, a Bulawayo headquartered micro-finance institution with footprint across the country.