I ponder on what to write with respect to my experience in the banking industry or to write about the journey so far as a stakeholder in the Oil and Gas industry or to write an article on the common difference between the structured environment of the bank or the “anything goes” of a “yet to be structured” environment or to write on how both the government and the bank albeit are killing the SMEs which would serve as the bedrock of our economic emancipation or how business owners are albeit working against their interest in their organisations.
I worked in the banking sector for twelve (12) years. My experience spans the Retail unit, Business process, Small Business desk, and the Commercial Banking unit.
These last two units exposed me to much of my experience and direct involvement in offering advisory services, packaging credit facilities for SMEs and also monitoring and ensuring prompt repayment of the facilities in questions.
SMEs are the backbone of many economies in the developed countries. Most International Corporations metamorphosed from the SMEs that have outlived their original owners by virtue of one form of support or the other from their respective governments. Examples of such abound in Europe, America and even Asia.
To many of the businesses in Nigeria, the banks as they are presently constituted offer lame support to the issue of growth to these companies with respect to “cut-throat” pricing which often sees the bank as shylocks in terms of facility packaging and recoveries. Most often times, the pricing especially the interest rate and fees are above the Bankers’ tariffs, which should guide the pricing regime of any facility.
Most business owners in a bid to improve and grow their business often accept and endorse the Offer Letters without recourse to any input by a financially knowledgeable person who would ordinarily preview such offers.
The lack of financial knowledge by the CEOs or the lack of a structured Finance and Account unit even if present lacks the authority to function in its letters and spirit. This is one of the single contributors to the failure or non-repayment of loans among the SMEs.
In cases where the financial knowledge is present, most of the CEOs and their businesses are already in strait need of finance thus anything goes. They do not have the patience to meticulously peruse the covenants in the Offer letters.
Lack of Cash flow Management:
Since making and receiving payments is at the nucleus of a business so it is expedient to have a system in place that is optimized to maximize cash flow and also manage financial information accurately.
Most business owners do not know how to manage their cash flow which is typified by purchase of slow-moving or excessive stock that gives rise to poor stock or inventory management; too generous credit terms being offered to customers, relatives and friends; cash expended on unnecessary items such as (houses, luxury cars, lands and private jets etc.)
When CEOs do not understand how their decisions can impact negatively on cash flow, they are almost certain to fail.
In terms of cash flow, they need to know how to track the money coming in and out of their businesses. Even the most successful business would fail if it runs short of cash: They need to learn how cash flow projection will help them to decide how much money they can afford to spend and warn them of impending problem.
Lack of Structures:
This is typified by the seemingly non-delineation of roles and functions among and within the personnel and business owners.
Most CEOs of the SMEs automatically assume the roles of the Marketers, Administrators, Visioners, and Human Resource expert and to cap it all, the Chief Accountant or the defacto Chief Financial Officer.
No SMEs would be self-sustaining or outlive the owners if there are no clear demarcations of roles and functions backed up by the entrenchment of organizational structure.
Most businesses that have minimum staff strength of fifteen (15) personnel should as a matter of principle have the following sub units, Finance, HR and Admin unit, Audit, Sales/ Marketing. Experts should man these units and where the companies do not have the financial strength to implement this, they should send such inexperienced personnel for training. Training cost may seem high in the interim but the long-term benefits surely will outweigh its costs.
The entrenchment of these units would strengthen the vision of the owners of the business, as it would allow more concentration on strategy and sales/marketing if the owners are the drivers of the business. An entrenched structure would bring sanity to the operations of the company and make such businesses evolve into formidable ones.
Lack of Separation of the Company’s and Business Owners’ Purse:
This is the non-separation or lack of distinction between the organizational purse and that of the business owners.
An average Nigerian businessman sees the organization’s revenue, as their own personal purse thus there is no defined distinction between the two. The seemingly lack of separation of the Organization’s revenue and that of the owner makes the organization an appendage of the business owner.
When such Organizations are availed facilities, such funds now serves as the salary of the business owners, serves as the fund needed to provide for lavish and ostentatious lifestyles and they get comfortable and begin to buy up assets (houses, state of the art cars, stocks etc) forgetting that the funds are needed for the growth and stability of the business. This error plays out to the extent that even the capital amount is eroded as some of them start investing in grandiose projects. No matter the level of sales, income and growth of such organization, this can only be short-lived and when there are business challenges or when the unexpected happens, such organization cannot withstand the pressure thus they become extinct over time.
Out of Control Growth:
Most business owners tend to over expand their business within a short period of time. In an attempt to do this, they borrow too much money thus becoming highly leveraged. Some even go as far as setting up other businesses that they not have the requisite knowledge on.
Lack of a Clear Goal and Vision:
The absence of clearly defined goals and objectives has spelt doomed for most Nigerian business owners. In not having defined goals and how to accomplish most of their objectives, they tend to focus on too many projects with undefined milestones and timelines that can facilitate the attainment of these goals.
In their bid to also bring their vision to fruition within the shortest period of time, they ignore the concept of “SMART”. Projects that should take three years to develop, they would take conclude within one year. This leads to dysfunctional management clearly typified by lack of focus, planning and vision. They tend to forget that funds coming in do not necessarily mean wealth or idle cash.
However, with SMART, the organization can remain focused. SMART is one of the management objectives, which means Specific, Measurable, Achievable, Realistic and Time based.
The entrenchment of this principle in a business can strategically assist in planning, setting of goals that are achievable, realistic and follow time-based principle of assessment.
Absence of Coaching Opportunities
Coaching as defined by the International Coach Federation is a partnership between a coach and a client in a thought provoking and creative process that inspires them to maximize their personal and professional potential.
Coaching allows enhanced thinking and decision-making skills, which could impact positively on the personal effectiveness of business owners that are disposed to having coaches’ monitor, their business performances.
Coaching tends to provide a support mechanism for business owners where they have a platform to share their ideas, identify and clarify their goals and objectives. The coaches make the business owners more accountable, assess and review their performance and also provide the platform where they can think and act upon their objectives.
The dearth of coaching opportunities has affected many business owners in Nigeria as they do not have professional assistance that they can sound out before trying out some business ideas.