Practical tools best for helping small businesses
Business owners just need to get their hands on the simple tools that successful businesses use, and be shown how to use them
Turkana county, in the neglected northwestern corner of Kenya, is not a promising place to do business. Because it has been neglected, aid pours in to help entrepreneurs overcome the barriers they face in growing their businesses.
Sometimes it can feel like too much. “I was initially resistant to attend another training programme,” said Samwel Muya, who runs Kapese Transport.
Small business owners in Turkana told us they had been trained so many times they couldn’t afford any more time away from their customers. And it did not seem to be having much practical impact.
However when they were given practical tools to help them run their businesses their response changed entirely.
One entrepreneur explained how by implementing a sales and marketing plan, she was able not only to expand her business but also start a complementary new business. She increased her employees from 10 to 15.
Another business owner stated that he had never kept records and were not able to budget or forecast. Given a tool to guide his business, it began keeping records and can now project its income. It has paid off an outstanding loan for four vehicles that are now generating income for the business.
This is not rocket science. Business owners do not need a year in a classroom to understand this. They just need to get their hands on the simple tools that successful businesses use, and be shown how to use them.
The stark evidence of research seems to be that training entrepreneurs just does not work. Yet we know business people who implement sound management practices do better than those who do not. So why does training not help?
There are at least two exceptions to the finding that training makes little difference to small business performance. One is counterintuitively to focus on the so-called “soft skills”.
A randomised control study of 1,500 microenterprise owners in Togo found that a psychology-based personal initiative training approach, teaching a proactive mindset and entrepreneurial behaviours, increased business profits by 30% over two years. The training paid for itself in increased profits in less than a year.
In contrast, the 500 firms offered a leading business training programme covering accounting and financial management, marketing, human-resource management and formalisation, improved only by a statistically insignificant 11%.
The other exception is when training helps firms implement effective management practices. This may sound obvious, but most training programmes don’t do that. They teach competencies assumed to be required for the task, and then assume learners will be able to apply these competencies when they return to work.
That last assumption in particular is seldom true in practice. Even when the trainer avoids the trap of teaching impractical theory, the newly competent trainees have to work out how to implement their new skills in their environments, often against well-established old routines and sometimes hostility.
So the way to have the best impact is to help business people identify what practices their companies need, provide practical tools (such as an app, a spreadsheet or a checklist) they can use to do so, and then show them how to use the tools. We are finding that this can often be done online.
Of the entrepreneurs in Turkana who went through a six-month Grow Your Business programme providing simple tools to implement proven business practices, 88% reported they had acquired new customers, 75% had secured new funding, and 100% attributed their business improvements to the programme.
In SA, Ntombixolo Mhlongo, who runs a tuck shop in KwaMashu, illustrates that business tools can be shared across the business more easily than competencies that tend to be locked up in one person’s head.
“I can see a huge change in my business for the better. What I usually do is print out my tool kits and take them back to work and reapply it (with) my staff — I share most of my lessons with them, especially customer service.”
• Cook, a former director of the Gordon Institute of Business Science, is chair and co-founder of African Management Initiative (AMI)