Hello, I manage a very small business enterprise with interests in real estate, e-Commerce and business consultancy. I think it would help a lot if I could meet with other managers of micro, small or medium sized businesses to share ideas and tips for surviving in Nigeria's harsh economic environment.

Now, I am sure one of the first questions I will be asked is to define what SMEs are paticularly in Nigeria. Well, I don't want to make this thread all-so-academic. Hence, I will say that if your businesses total assets does NOT exceed N100 million, this thread is primarily for you. Managers of bigger companies can also contribute especially if they started-out as small businesses.

I hope to read from you soon.

Thank you!

I find this article interesting and I think it might help to shape our discussion too.

Concept of Small and Medium Enterprise (SME)

One of the major characteristics of the knowledge economy is entrepreneurship. Entrepreneurship is the engine growth of any economy.

It might seem difficult to obtain a precise definition of small and Medium Enterprise. Several writers have propounded various definitions and explanations as to what Small and Medium Enterprises are. Some have defined SMEs based on the characteristics of the business, such as size, level of operations, type of industry, assets employed, and number of employees, turnover, market, management or control of the business or several others.

As has been observed from the afore mentioned, there is no consensus on the real definition of Small and Medium scale enterprises (SMEs) as can be seen that, both terms, Small and Medium are relative and they differ from industry to industry and country to country. The difference amongst industries could be seen to be the difference in capital requirements of each business, which those among countries could arise as a result of difference in industrial organisation by countries at different stages of economic development. What might therefore be defined as SME in a developed country can be regarded as a large scale enterprise in a developing country using partners as fixed investment and employment of the labor force. It is important also to recognise that definitions change over time and hence, even in a developing country, what was previously classified as SME could be regarded as a large scale industry when the quantities of relevant parachutes change during the production process.

Here in Nigeria, several attempts have been made to define and classify SMES. In focus, different government agencies apply various definitions. For instance the center for Industrial Research and Development (CIRD) of the Obafemi Awolowo University, Ile-Ife, according to Obitayo (1991), defined a small - scale enterprise as an enterprise with a working capital base not exceeding N250, 000 and employing on full time basis, 50 workers or less.

The Nigerian Bank for commerce and Industrial (NBCI) adopted a definition of small - scale business as one with total Capital not exceeding N750, 000 (excluding cost of land but including working capital). The federal Ministry of Industry's guidelines to NBCI defined a small - scale enterprise as one with a total cost of not exceeding N5000, 000 (excluding cost of land but including working capital). The Nigerian Industrial Development Bank (NIDB) defined Small - Scale enterprise as an enterprise that has investment and working capital not exceeding N750, 000, while it defined Medium Scale enterprises as those operating within the range of N750, 000 to N3m. In 1979, the central guidelines to commercial banks, stated that, Small - Scale enterprises were those with annual turnover not exceeding N5000, 000, while the merchants banks were to regard Small- scale enterprise as those with capital investment not exceeding N2m (excluding cost of land) or with maximum turnover, of not more than N5m.

It could be observed that the lack of the consensus in the appropriate definition of what constitutes a Small-Scale enterprise in the system would have a serious application for any analysis of the group. Also, it can b e argued whether these criteria could hold in the present day Nigeria, given the higher operational costs as a result of the continuous depreciation of the national currency and the resultant inflationary impacts.

At this junction, it would be prudent enough to consider one of the most probability definitions that is in line with this written. That is to say that under the present situation, the most recently agreed definition is that adopted by the World Bank. In the implementation of its programme of $270m, loan assets, (excluding land) plus cost of investment project not exceeding N10m in constant 1988 prices.

This definition was adopted by the National economic Reconstruction Fund (NERFUND), the agency saddled with the responsibility of financing SMEs. Incidentally, in the new Industrial policy for the country, Small - Scale industries are defined as those enterprises with total investment of between N100, 000 and N2.0m exceeding the cost of capital, but including working capital (Guidelines for the Small - Scale industries Equity Investment Scheme 2001), as in (G.A) Ogunleye, in a paper titled, "Small and Medium Scale Enterprises As foundation For Rapid Economic Development in Nigeria as quoted in (Maryland Finance Company and Consulting Servicing Ltd 2004, Pp. 35 - 36).

Despite the disparity in the comparative definitions of SMEs, the enterprise have some common characteristics, first, amongst these is that, ownership and management are then held by one individual/ family and hence, decisions are often subjective. Secondly, SMEs require Small Capital base in general, regardless of the industry and the country where they are based. However they are often having difficulty in attracting funds for expansion as a result of which they have to rely heavily on personal sources.

Thirdly, in practice, the management proprietor hardly differentiates his private fund from the company's funds and this largely contributes to the inefficiency and non-performance of many SMEs. For them, most SMEs operate with labour intensive technology. They find it less easy to stiff from one product line to something radically different; in fact, most SMEs tie their objectives more closely to the product line than to other matters such as the use of capital. In most SMEs, there is less organisational differentiation, higher employees turn ever and higher labour investment ratio. Finally, the rate of business mortality is high, probably due to reasons of low capital, inadequate, Market information, lack of relationship between business life and that of promoter and low level of operation, amongst other factors.

Structurally, the Nigerian SMEs mainly of those engaged in the distribution trade who, according to Chief John Odeyemi, constitute about 50per cent of the SMEs, 10per cent are in manufacturing, 30per cent in agriculture, 10per cent in service. Together, according to chief Odeyemi, the SMEs account for well over 60per cent of Nigerian Gross Domestic Product, generated mainly in the agricultural, service and distributive trade sectors. One interesting feature of the Nigerian SMEs is that distributive trade component is generally mere commercially variable than the manufacturing components, which is why they often emerge as better candidates for financial institutions.

Chief John A. Odeyemi in his paper "Conceptual Issues and feature of Nigerian SMEs" presented in the Development Focus, June 23 - July 23, 2003; opined that, SMEs start typically with an ownership structure of sole proprietorship. But in the past two decades, this orientation has been changing, partly as a result of the indigenisation decree of '70s and partly as a consequence to better exposure and enlightenment. Many SMEs, are now in one form of partnerships or the other and they are better for it, while some are still stuck in their old ways. They are registered either as enterprises or as limited liability companies and are characterised by highly centralised labour intensive operations. They are also characterised by highly centralised management and administration, often built around the owner of the business, which is also, perhaps, why they are found to have a high mortality rate.

^Source: http://thenationonlineng.net/web2/articles/23036/1/Concept-of-Small-and-Medium-Enterprise-SME-/Page1.html

I'll be following the post and updating...

I'm the CEO of Businesstools,a leading firm of professional business plan writers.My advice to aspiring entrepreneurs is to conduct adequate research before deciding on a location to site their businesses.The location of a business can make or mar it.Choose a location with high traffic even if it means paying more.You know your target market.Choose a location that makes you visible to them.

Hi, i think this will be an interesting thread. I will share my opinion when i log on fully to my system.

Whilst I appreciate educative posts and links, the aim of this thread is not to create a platform for people to promote their websites, blogs or businesses. I just want us to share ideas, management tips and best practices via discussion.

222Martins: Hi, i think this will be an interesting thread. I will share my opinion when i log on fully to my system.

Okay.