Sustaining partnerships and investor interest makes up the lifeblood of businesses in the medium industry. The inherent difference in reach that a Small dan Medium Enterprise (SME) may have over an MNC means that they tend to rely on their investors’ network and credibility – if an investor’s name can be trusted, then it follows that the business can be relied upon for what they contribute. Which begs the question: what, exactly, are the key criteria for attracting investors to SMEs? How do these qualities intersect and form a cohesive whole?
Credibility
An SME’s credibility is, perhaps, the biggest factor in determining investor and partner interest. No one wants to work with who they can’t trust to be reliable. SMEs particularly need to be credible because they can’t afford not to be – they don’t have the inherent advantages of reach and recognition that MNC’s do, so it becomes important to show that the work they do and services they provide are executed well and in consistent fashion.
Portfolio
A part of establishing credibility is assembling a good portfolio, which provides investors a means to gauge the merits of an SME in a tangible way. Investors are able to assess from a sample size of an SME’s work to determine whether they would be fit for investment. The higher the quality of a businesses’ output, the more interested they will be in being a part of it going forward. It is important to point out that it is ‘quality’ that investors are most interested in seeing – quantity is good insofar as the results translate to good work. A well curated portfolio is as much a showcase of the SME’s potential as it is a showcase of what it has accomplished.
Experience
Connecting to the point above is experience. Typically, how experienced a business is at handling a particular niche translates to the quality of work they are able to produce. When an SME has been at it long enough to consider the particular needs of the industry they operate in, they are more likely to convert that experience into results that become apparent to prospective investors and partners. There is also an implicit message communicated in having a substantial amount of experience– that the SME is able to perform their tasks consistently and is able to adapt to potential challenges going forward from investment.
Scalability of Business Model
Another key aspect that investors and partners look for is how scalable the SME is and how much growth and/or revenue it can generate proportional to the cost of investment. If an investor can be assured that the business model utilised by a company is able to sustain growth and net them a positive ROI, they will have more reason to invest and support them. This goes similarly for B2B partnerships – if businesses are able to see that the model supports mutuality in benefits, it will eliminate a majority of hesitance on the matter. Looking at the model utilized by Tuku Coffee reveals that the scalability of a company need not translate to forcing unmitigated growth, addressing the tension between making a company scalable and making it produce good quality work. Through careful quality-control and maintaining lean operation costs, their growth from a humble shop in Cipete to one of the most recognisable coffee brands in Indonesia represents a way for a company to consider scalability – an organic, community driven growth that doesn’t sacrifice the quality of product.
Extraneous Factors
How an SME relates to the broader world around it is an important thing for investors to consider – it isn’t enough for them to consider the financial literature of a business, investors are also incentivised to buy into businesses that are environmentally responsible and add no regulatory complications to their investment. As environmental regulations get tighter, it becomes favorable for investors to choose businesses that are able to conduct themselves responsibly. Choosing to be environmentally responsible as an SME is an extension of commitment and adaptability. How they are perceived by prospective investors and/or partners can come down to how much they are able to meet their goals in this area.
A variety of factors influence how prospective investors and partners may view a relationship with an SME. If SMEs are able to win them over, it will be because they have interrogated the components that are of interest to these parties and prove, through them, that they can be relied upon.