The SME CEO Peer Group


9 Reasons Why SMBs Are Not Able To Scale

Scaling an organisation would be the ultimate goal for most entrepreneurs. Building on the foundation that has been put in place by many years of hard work, might seem like an easy task. However, the success of the organisation depends on a number of reasons that pivots around the decision-making ability of the CEO & his ecosystem.

Many a times the ‘inability to scale’ is misunderstood to be the ‘failure’ of the organisation. These terms are often used interchangeably, but considering the economic landscape of the Indian subcontinent, there are many small and medium sized businesses that sustain and survive but do not grow. When businesses sustain, they might be showing a profitable report but their scope for larger profitability is hampered.

But, why precisely are certain SMB organisations unable to scale?

  • Lack of Vision
  • The core hindrance to organisational scalability would be the lack of a clear long-term vision. The vision must focus on streamlining operations and creating an environment where individuals can innovate, learn and grow – and the vision has to be communicated to all in clear terms and achievable milestones.

  • Lack of Time
  • The Founder or CEO of an SMB is usually seen to be shouldering the various responsibilities right from sales, delivery and hiring to managing the Finances. This could invariably leave them with limited time to envision and work towards building the organisation.

  • Inefficient Team
  • High performing teams form the backbone of any organisation and it is the foundation to attain scale. In some cases, either due to lack of leadership qualities in the CEO, or the absence of a sound company culture, the team may begin to show inefficiencies. It could also be attributed to individual inefficiencies in the team players, which hampers the CEO’s ability to bring his organisation up to scale.

  • Thin Margins
  • Most SMBs operate on thin margins leaving them with little scope to think about other strategic investments for the future. All the cash flow is prioritised to manage day-to-day business activities. Unless the head of the organisation takes an informed decision on where to invest his profits for the future strategically, he will never be able to attain scale.

  • Micro-management
  • Micro-management is not only exhaustive but also creates the loss of trust, loss of productivity and could result in a high turnover among critical resources. When employees loose autonomy they find themselves in a toxic environment that hampers their growth and causes employee attrition, which again impacts the growth of the organisation.

  • Limited or Nil Digitisation
  • Digitisation has brought about a revolution in the way businesses are run today. The various business intelligence and productivity tools would save a great deal of time and effort. But SMBs are a little hesitant to adopt technology. Adopting technology can improve business efficiency to a large extent, and allow them to manage their business better by leveraging on the digital tools and dashboards, and use their time to focus on strategic initiatives to grow their business.

  • Geographical Restrictions
  • Many SMBs are unable to extend their sales and services beyond a specific geographical location. This could be due to insufficient resources, lack of a skilled and fully equipped team or other multitude factors. One way to circumvent this handicap is to leverage Digitisation, leveraging Partnerships with Specialists / Domain Experts, and reap its benefits.

  • Organisational Gaps
  • SMBs require a robust process and system to compensate for their lack of highly paid and skilful resources as compared to larger organisations. An efficient process management system allows the organisation to run on a process rather than being dependent on the CEO/Owner, and brings about better accountability and higher levels of efficiencies across all the functions of the organisation. Many SMBs fail to scale because of the lack of a fool proof Organisation Process & System which can propel the company to the next level.

  • Putting your strategy to Work
  • At times, the organisation has a vision and processes in place, but there is no drive to achieve greater heights. This could possibly be because of the lack in methodology in transferring strategy of the management to the lowest employee in the hierarchy for the strategy to be successful.

    Making the growth strategy work among his/her employees is one of the biggest challenges of CEOs today, and today there are other external partners who put their skin in the game to partner with the SMB in their overall growth. It is time SMBs started trusting external partners to help them in their growth journey and taste success!

    These are just a few of the parameters that can have a profound impact on the growth of an SMB organisation, and there are many more factors at work, which shape the organisation over a period of time.

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The idea of writing creative copy that persuades is what introduced Smitha to the world of writing. At CEO BottomLine, she is a correspondent, brand publisher and content curator.


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