A model plan for small businesses

Small businesses failure rates can be very high. It is estimated that between 10 and 20 per cent of start-ups do not survive their first year and another 10 to 20 per cent do not survive their second.

Having a sustainable business model can boost your chance of long-term success. Small businesses which grow and thrive share many common characteristics.

Get and keep the right people. Success starts with the owner. Entrepreneurship comprises a strong sense of responsibility and appropriate risk appetite. If you don't think you have that characteristic, work with someone who does, or another company, and leverage those qualities. At the same time, you need to be prepared to share the success with them.

Having good staff is another crucial factor. Employees also need reasonable pay and rewards to enhance their sense of belonging. It is cheaper and easier to keep good people than to be continually searching for new employees.

Set up good corporate governance. No matter how small your business, you need that. Corporate governance is the set of processes, customs, policies, laws and institutions that determine how a business operates. For example, all corporations should implement guidelines and mechanisms on everything from pricing to delegation of authority to ensure staff understand expectations and are accountable for their actions.

Analysis

Before coming up with their business plans, small business owners should have a thorough analysis and understanding of the market and how it is linked to their own business. There are a number of tools and books that small and medium enterprises (SMEs) will find helpful in understanding their market positions. 'SWOT' analysis (strengths, weaknesses, opportunities and threats) is a great strategic planning tool. And that's useful to do on an ongoing basis as the business grows.

Make use of external resources. There is a range of government bodies and quasi-governmental institutions that offer a lot of support to SMEs. Small business owners can also benefit from learning from each other. The best way to do this is to join trade associations.

Partner with your bank. Some companies are afraid to disclose company information to banks, fearing that the information will be leaked to competitors. But if you don't provide adequate business information when applying for financing, it makes it hard for banks to assess the company to provide help.

Use professionals, such as accountants, solicitors and tax consultants, in order to have a clearer picture of the economy and relevant legislation. Also, through these channels, SMEs may find potential partners and business opportunities.

Finally, SMEs should take advantage of their flexibility to change quickly as market conditions change. By equipping themselves with both the internal resources and leveraging external support available, it should not be difficult for SMEs to run a sustainable business.

- The writer is head of business banking at HSBC Bank Middle East.