- Guiding SME Growth
Speaking with Hisham Farouk for even a short amount of time is educational, to say the least. The managing partner of Grant Thornton UAE has long been entrenched in not just the regional business scene, but the global one too – and is something of an expert on SMEs.
He has advised every kind of business imaginable, from multinationals through to early-stage start-ups, drawing on his extensive experience not just with Grant Thornton, but as a member of the Corporate Finance Faculty, and UAE Chapter of Young Arab Leaders, among others. So if anybody should know about what it takes for an SME to grow, it’s him.
“Any SME starts with an idea and conceptualising that idea,” he says. “This is a critical element because you start to put into it the structure of how it will evolve into the business model. That’s the first step. “Then the founders realise they can get support systems, whether friends or contacts, to work with and begin raising funds in the nuclear realm – savings, family help, and so on.
“Then you have a very big area and there’s a big question of what to do next.” Explaining that this is the point at which investors come into the picture, Farouk highlights an issue which exists for the UAE’s SMEs – the lack of a clear and coherent system of finding angel investors. He says: “A range of investor types come in now. There’s the type which wants to see returns straight away, so won’t touch a start-up.
Then there are angel investors who come in and invest out of faith. They invest on the basis that they will come in on a low valuation and that the business can grow. “The problem locally is that we don’t have these angel investors in the ecosystem. Certainly not like in other parts of the world, such as Silicon Valley or parts of India, where people know where they can go to access that kind of support structure.
“But saying that, there has been a big shift in the market. Dubai SME, Innovation 360, Wamda, and so on have helped a lot. Public platforms are available. There are lots of live demos where entrepreneurs preset their business ideas in a bid to get funding.
“To try your idea in a revenue generating model needs cash. You need the funding to support you and get you to that point, and then the cycle can continue – you build up the model and generate income.” At which point, he explains, the series A investors come in, taking you two or three years further along the road, to the point where you can generate enough money to sustain your business, or get funding from the banks.
The key, he says, is in attracting the investors in the first place – and there are certain things you can do to put yourself in a strong position. “Obviously the key elements for your business are passion and hard work. Sales pitches are driven by passion – you need to get people to believe in your idea and if they don’t feel the passion, there’s nothing for them to hold on to.
“But when you identify the investors, you have to show them what they want to see. And they want to see structure. “Organising the structure of your business is vital. Investors want to see a legal structure, accounting framework, and so on. It gives them confidence that you have business sense and can create a strong infrastructure.
“Often SMEs will miss out things like cash flow management, structure around employees, and so on. Many SMEs say they will invest in these when the time is right, but in saying this they can miss out on opportunities and miss the right time altogether.”
Farouk explains that recent changes to Grant Thornton’s way of working allows the company to give SMEs a more accurate service, describing the ‘business lifecycle’ model that they work to. This lifecycle allows them to pinpoint where each SME is on their journey, and consequently what the best course of action and advice is for each of them.
“Wherever you are in that lifecycle, we can help you at that point,” he says. “It goes from the very start, all the way up. Every business has a lifecycle and we’ve aligned our services to that, which makes for a much more accurate way of working.”
He also highlights the mentoring work Grant Thornton does, pointing out his personal work on the boards of some SMEs, as well as work with those businesses that are still too small to have a board. “We want to invest in these companies,” he says. “Our service can be expensive – we know that – so we want to do something which helps the small businesses.
“We offer free assessments, where we come in for half a day and point out the things they need to look at and pay attention to in relation to risk, accounting, and so on. We also have outsourcing facilities where if you were going to hire an accountant, we can provide an accounting team for the same price. We try to give you more bang for your buck and support your growth.
“But being organised and structured is so important. That way you can attract investment and really start your journey.”
As featured in Arabian Business Start-up Magazine