Dubai: To avoid failure, small and medium enterprises (SMEs) need to be more prepared before getting into the market, SME professionals and economic experts said on Wednesday at the SME World Summit 2014 in Dubai.
Hani Al Hamli, Secretary General of Dubai Economic Council, called upon SMEs to prepare very well to enter the market.
“To survive in such a competitive market and to beat all challenges, entrepreneurs should have a comprehensive knowledge about the nature of the market including demands, competitors and legislations,” he said.
The two-day Summit, co-hosted by Dubai Economic Council (DEC), Dubai SME and SPI Group, brings together SME entrepreneurs, investors, executives, experts and academia to discuss the strategic role of SMEs in supporting the economy.
Government officials, business leaders, international economists and financial experts also participated in the Summit.
Al Hamli said that to enhance entrepreneurs’ chances of success, government and businesses should expect challenges from the market.
“Despite the two main challenges in the SME market — financing and weak legislation — entrepreneurs should better study the market, be more aware about their product and clearly define their targets,” he said.
The government should also encourage SMEs by providing incentives through upgrading legislation and reducing the cost of doing business, Al Hamli said.
An Oxford-based professor has issued a stark warning to budding entrepreneurs: only 6 per cent will be successful and build over 60 per cent of job growth for the GCC economy.
Professor William Scott-Jackson of HR firm Oxford Strategic Consulting said that while the GCC is encouraging entrepreneurship to boost jobs, only a minority of entrepreneurs ever succeed.
This discovery follows new research from Oxford Strategic Consulting and energy company BP, which shows that 67 per cent of new start-up businesses are likely to fail, while 33 per cent will be successful.
But, from this 33 per cent of successful entrepreneurs, only a small 6 per cent will go on to create further jobs that will boost the GCC economy.
According to the latest report from the Department of Economic Development (DED) in Dubai about SME sector in Dubai, SMEs account for 42 per cent of the total workforce in Dubai. Of this, Micro, Small and Medium firms account for approximately 14.6 per cent, 16.4 per cent and 11 per cent of the total workforce respectively.
Service SMEs account for a majority (51 per cent) of the total workforce employed within SME enterprises in Dubai, followed by trading (33 per cent).
The Manufacturing sector is estimated to contribute another 16 per cent to the total employment within the SME sector.
According to Dubai-based SMEs, financing is still a main obstacle and which might lead to business failure.
Hazem Al Hajjaj, CEO Micro Automation Industries, said: “I am one of Dubai’s Top 100 SMEs, ranked by the Department of Economic Department based on performance, but I can’t get proper channel for finance to boost my business.”
“While HSBC Bank is officially selected to support Dubai SME initiatives, they closed my company’s bank account because it is below Dh30 million.”