The not so often discussed reason for small business failure – exploitative big business

As another year comes to a close, we have been doing some reflecting on the entrepreneurial ecosystem in South Africa – as we often do.

There has been an abundance of reports written on the challenges for entrepreneurs in SA and beyond, and the conclusions many of them come to are certainly things we ourselves have seen, such as lack of funding (there is a lot of funding but it is often mismatched to where the actual needs are, thus creating funding gaps), lack of effective development services and support, access to mentors, access to markets, etc.

This year, however, we wanted to speak about a little discussed barrier for small business succeeding: the lack of protection from exploitative practices by big business.

It is difficult, for example, for a small business to know exactly what it needs to negotiate when arranging the basic business necessities such as lease contracts, IT and internet services, phone services and similar typical office set-ups and yet these types of things can very much affect (or even destroy) a small business’ likelihood of success.

This year, we have personally seen some of the following practices taking place:

  • Landlords asking small businesses to sign leases that are incredibly prohibitive and very skewed in favour of the landlord with few protections for the tenant, even in the face of extreme non delivery of service (and subsequent failure by at least one landlord to provide a range of services they are responsible for with the small business in question feeling helpless).
  • Internet and phone service providers asking for 1 year or 2 year contracts with little to no recourse if the very services they are supposed to be providing are working or not. With no attention to customer service or communication with the small business client when things go wrong, they tend to focus instead on the contract and legalities instead of actual service delivery.
  • Cutting off phone lines due to a one day late payment despite many months of on time payments and with no prior communication around doing so – thus compromising the professionalism of the small business affected, with again no recourse for the small business.
  • Service providers promising the moon and presenting themselves as experts but then failing to take accountability when they clearly make an error and failing to help rectify it. Instead, they often ask for more money to fix the problem.

Generally service delivery is a problem – where is customer service? Where is the understanding that the customer is the most important part of your business and not someone to just lock into a contract and frustrate?

Some of us reading this may think that this happens to us all personally and not just to small business. However, while for a person it is highly frustrating, for a small business it can be deadly. We have seen all of these things and more happen this past year and we have seen the strain they have put on small business – with loss of business, loss of revenue, as well as escalating costs far beyond what was planned.

So what is the solution? Certainly, one aspect is lawyers to help negotiate better contracts. However, the solutions need to go beyond this.

Perhaps what is needed, as a start, is a deeper understanding of customer centricity. If the world has taught us anything in the past few years, and with the rise of social business especially, it is that there is an increasing shift of power to consumers. Companies that fail to realise this and fail to take care of their clients, their workers, and their communities will eventually be left in the dust. Some of these bigger companies who know they are guilty of some of these offences can actually choose to come to the party and choose to innovate solutions that will help SMEs thrive while also creating a better name for themselves – thus growing their positive brand image.

From the point of SMEs, citizen action can also work. For example, with a large landlord a small business can talk to other tenants and band together to lobby for better services and to ensure they are being heard. We are in a social media age and we have a lot more power collectively as small business so why don’t we use it together to help advocate for each other? There is a new way of doing business altogether that is on the rise and collaboration is key.

Considering the ecosystem as a whole is therefore of utmost importance. So yes, we need better funding and better support. Better education and better awareness. But mostly, we need to go back to a better sense of a joint community of businesses – one that understands that while competition is necessary and healthy, we can prosper most when we take care of our customers in a true and authentic way and help smaller businesses thrive and strengthen our economy for the benefit of everyone.

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