Small businesses in a time of strain

It is hard to keep up with the dizzying pace at which the country is changing. Cityscapes are evolving every day. In almost every neighbourhood, new buildings have gone up in the last decade and, wherever space allows, more are still going up. These are the years of growth and modernisation that have transformed lifestyles and attitudes. Almost everyone is thinking, talking and initiating new ventures. People are bustling with activity, taking the changes in their stride. The country has become a vast market of around 170 million people where the young outnumber those of non-working age. If this is not the ideal environment for investment and new business, then what is!

But is it really so easy to conduct business here? Most established entrepreneurs would tell you it is not. They would argue that enterprises of all sizes are struggling to survive. Sales are sluggish, partly due to high inflation. There is also the persistent problem of relative unavailability of credit. Every business requires capital, but small businesses often face a perpetual capital crisis. Starting and running a venture demand investment which is not readily available. Those who do start one must often wait a long time before they see any return on their money, time and effort.

A former businessman who had given up his trade to take a job after finding the struggle too exhausting can provide a realistic view of competitiveness in business. He had inherited a clothing business from his father in his home district. After his father's passing, he took over and discovered that several local retailers owed him substantial amounts of money. These retailers would take products on credit, sell part of them, pay back a fraction of what they owed, and then take more goods on credit again. Over time, the unpaid dues kept mounting. It even grew so large that he had to sell a piece of his own land to raise funds and restock, hoping to revive the business. But the same pattern continued. The final blow came when he learned that some traders instead of paying debt were using their profits to buy land themselves. Eventually, he abandoned any hope of recovery, closed the business and took up a job instead. 

This kind of story is far too common. It is indeed a challenging task to achieve success in small business. One can see that many of those who were in business a generation ago have been replaced by new faces. Clearly, the next generation of businesspeople would often come from the same families were it not for the fact that these enterprises have become too difficult to run. Running a business often means dealing with scarce capital, but even when money is not the primary issue, it is still hard work and a lot of stress. Keeping a business strong is not easy either. It is a different kind of challenge. A successful business can become too comfortable and afraid to take risks, especially as it gets older. The example of Nokia comes to mind. When the company dominated the mobile phone market, it failed to adapt to the smartphone revolution and quickly lost its edge. All businesses must keep reinvesting profits to grow and avoid being left behind. With so many players in every field, for a new business, it is especially tough to carve out its own space. They have to be innovative and smarter and use every tool at their disposal in order to survive.

On the other side of the coin, there are those who see business creation as an almost effortless process and the most natural thing in the world. You have a product or service, you find few customers and off you go. Simple as that. Once it takes off, the task becomes balancing management, growth and daily operations. The many small businesses that supply and support the ready-made garment industry stand as proof. They have managed to operate and survive in a highly demanding sector, adapting effectively to meet the needs of larger exporters. Their success did not happen by chance. It grew out of the opportunities that exist in the business environment and from the determination of entrepreneurs who learnt to utilise complex factors such as labour market to produce efficiently. Our cheap labour is a double-edged sword, both an opportunity and a limitation at the same time. Hiring workers is not difficult for small businesses, but retaining skilled ones is. Because salaries and benefits are lower than in big companies, many workers do not want to stay with small businesses for long.

Financial management presents another layer of complexity. Many businesses incur losses simply from a failure to keep accurate track of income and expenses. A lack of knowledge regarding taxes and loan instalments often exacerbates the problems. New entrants are hardly aware of tax laws, and many do not pay their dues not out of intent but ignorance. However, when tax and VAT officials catch up with them, the penalties can be severe.

Perhaps one of the riskiest activities a business owner can undertake in our context is active participation in politics. In our volatile political landscape, if owners tilt to one side and the other side comes to power, it will definitely affect their businesses. This is not to mention the more insidious pressures that many business people suffer, from demands for unofficial payments to outright extortion by local power brokers and party activists. This places immense burden on the businessmen and forces them into a corner. All in all, doing business in Bangladesh is a high reward endeavour wrapped in high risks. The rewards are immense, but only for those with the nerve and the foresight.

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