Overcoming Barriers - How to Support Small and Growing Businesses to Scale.

Spring Impact recently published a research report produced in partnership with Numbers for Good, with support from the Argidius Foundation. The report identifies seven key barriers to effective advisory services focused on scale–– technical assistance (TA)–– for small and growing businesses (SGBs), and recommends the necessary steps to help more SGBs reach their scale goals.

What if we were to tell you, that right now, there are a group of extraordinary organisations providing approximately 66% of employment opportunities, and generating 86% of new jobs in developing economies?[1]. That these organisations have the potential to transform economic development and access untapped markets of an estimated 4.5 billion new customers in 92 countries, valued at approximately $5 trillion USD.[2] That they are providing quality jobs, goods and services locally, and by doing so are lifting families and communities out of poverty, and generating larger-scale socioeconomic prosperity.

We’re not talking about a tech company, or a government initiative, but small and growing businesses (SGBs). SGBs are interesting for a few reasons. Firstly, they are distinct from the broader group of micro, small, and medium three enterprises (MSMEs) in that despite their size, they have strong ambitions and potential for growth.

Secondly, in their quest for financial sustainability they create social impact, economic development, and increase access to critical goods and services for underserved communities.

[1] Ayyagari, M., Demirguc-Kunt, A. & Maksimovic, V. 2011. Small vs. Young Firms Across the World: Contribution to Employment, Job Creation, and Growth. Policy Research Working Paper WPS 5631. World Bank
[2] Spending power in purchasing power parity (PPP) terms. Global Consumption Database: http://datatopics.worldbank.org/consumption/ Accessed November 2017.
[3] Inclusive businesses are considered a subset of SGBs. Business Call to Action, United Nations Development Programme Kenya, KEPSA and SIB, New Horizons: Accelerating Sustainable Development through Inclusive Business in Kenya, 2017. As cited in ANDE, (December 2017):
[4] Intermediaries are organizations that work with SGBs, funders, and/or TA providers but, for the purpose of this research, do not directly provide TA to SGBs. Intermediaries include organizations such as development finance institutions, private foundations, member networks, and research institutions.

WHY SGBS? - THE CASE FOR SCALE

It’s no wonder then, that SGBs are viewed as one of the most promising avenues for economic development and poverty alleviation in both developing and emerging economies. According to the United Nations Development Program Kenya, scaling SGBs could catalyse progress towards achieving the Sustainable Development Goals (SDGs).[3]

Armed with this knowledge, our report looks at how we can support SGBs to scale their tremendous success. What technical, practical and material assistance is needed to help SGBs scale so more people are positively impacted? When we talk about scale, our research focuses on replication, which is the process of taking an organisation, product, service, or a set of core principles to other geographic areas or markets, or leveraging others to do so.

A SUPPORTIVE ECOSYSTEM?

Recently, a thriving ecosystem of support has emerged around SGBs, consisting of philanthropic and venture capital, as well as a host of non-financial support providers and intermediaries.

Technical assistance (TA) providers are a key segment of this supportive ecosystem. They form part of an important group of intermediaries and are a fundamental component of any SGBs’ success.  In recent years, the TA market has grown to cover a spectrum of activities that include investment readiness, financial systems, strategy and operational support. But, despite this array of support there are still only a few definitive assessments on the best methods and techniques to help SGBs scale.

In order to learn more about the barriers SGBs face when trying to scale, and what kind of support they could benefit from, we asked some of the key stakeholders in this ecosystem—SGBs, impact investors, TA providers, and intermediaries— to share the challenges they faced when scaling SGBs.[4]

Although not all SGBs are focused on social impact, all the SGBs interviewed for this report have clear social and profit motives.

HOW CAN WE OVERCOME THE BARRIERS?

Our report sets out five recommendations applicable to our four key audiences: SGBs, investors, TA providers, and intermediaries.

Each of our recommendations responds to several barriers, and includes a list of specific activities, potential risks to be aware of, and possible key performance indicators to gauge progress.

1. Approach scale early: Time is of the essence. By thinking about scale early on in the process, SGBs can budget for the necessary funding for scale TA support. Thinking this way can also help funders approach scale TA in a customised and holistic manner for each SGB they are funding.

2. Start with a deep understanding the SGB’s scale needs: If a TA provider doesn’t understand the SGB’s needs then they can’t provide effective scale TA. Both sides can help with this. TA providers can take steps to improve the needs assessment of the SGBs and work with them to co-design the type and level of engagement they will provide. SGBs can help by thinking ahead of time about their scale TA needs before engaging with providers.

3. Plan scale strategically and systematically: For SGBs, this means moving from an opportunistic mindset to a strategic and systematic one. SGBs will need to account for staff capacity and capabilities to better engage with and execute scale TA recommendations. Funders can help by incorporating standard approaches to scale readiness assessments and support for SGBs. Meanwhile TA providers can use a more robust methodology, such as the Five Stage Process, to improve depth of support and maximize their potential impact.

4. Tailor support accordingly and incorporate sustainability: Scale is an iterative process. To support the process and get the best out of it, SGBs can assess scale priorities and available internal and external resources. They can also work with funders to incorporate monitoring feedback loops as they scale. Funders can develop timelines and resources that respect the SGB’s needs and support the governance of TA projects to ensure value. For TA providers, we recommend developing exit plans with the SGB so that the SGB is equipped to engage and implement TA expertise in the long term.

5. Bolster the scale TA ecosystem: We can support the scale ecosystem by developing networks to create and distribute helpful knowledge and tools related to scale TA. By sharing knowledge, we all benefit. But no one group can create change on their own, we call upon:

  • Funders to share resources for sourcing vetted providers and increasing knowledge on best practices;
  • TA providers to help identify and recruit local suppliers and implementation partners. TA providers can also help by developing and promoting a value proposition for why TA increases social and financial returns to de-risk investments;
  • Intermediaries to build awareness and consensus on the best practices, knowledge, and tools to scale SGBs successfully, and facilitate linkages to high-quality TA providers as well as SGB peers. They can also build a more robust directory or platform to connect SGBs and funders and facilitate more SGB engagements specifically around scale.

SGBs are doing tremendous work, despite facing a myriad of barriers and challenges. If we want to see more positive impact from SGBs scaling, we need to work on ways to help them overcome these barriers to effective scale TA.

This report doesn’t have all the answers. Our aim is to set out our recommendations and inspire others to join the conversation and get involved, by taking these recommendations forward and implementing them in their future scale TA plans, engagements, or even in their work in the space more broadly. It will take time and a collective effort to ensure that SGBs no longer face the barriers to receiving the right scale TA for them but we’re sure we can get there.

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