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Common reasons why some micro, small and medium enterprises (MSMEs) fail

Updated on August 23, 2019
A typical retail store in the Philippines and an overused business format.
A typical retail store in the Philippines and an overused business format. | Source

We're quite so functional when it comes to starting something be it a self-resolution or a collective project.This enthusiasm is much more manifested when it comes to starting a business. Some may dawn from scratch and religiously trail the whole process until success is reached while others may try to kick off really big in the hope of a bigger return in the shortest time possible.

Whichever path they choose to take, however, start up Micro, Small and Medium Enterprises (MSMEs) are not spared from encountering almost the same set of challenges that if not given immediate and intelligent actions, could lead to the phase out of every heap of centavos invested as a capital in the business.

Below are some of the subjective observations with regard to common challenges and culprits on the failure of micro, small and medium enterprises in the country.

"I like your business. I'll put up one too beside yours."

It's quite a consensus that we are some of the masters when it comes to echoing trends of other countries. And we seem to have brought this in business.

Some would start an enterprise on the impulse of jealousy and short-term motivation and perseverance. If one starts a retail store in the community, another follows suit until almost every corner in the neighborhood has the same format of business.

It may be a good idea if aspiring entrepreneurs make sure that they would not all end up broke and bruised due to pride, envy and the toxic habit of imitation.

"The money in my business is all mine."

It's a common thing among some MSMEs owners to treat business money similar to their personal money.

For instance, a sari-sari store owner grabs a kilo of rice everyday for household consumption thinking that the profit of the business by the end of the month will just restitute such charges until such time that, without realizing it, the business has already deteriorated and eventually needs more cash to be injected for it to stay afloat.

"Profit will keep up with my [unnecessary] purchases."

For MSMEs that have frail money in the cash register, being thrifty is one of the primary tips that experts offer. To most of us however, being frugal is hard to achieve because of the culture and lifestyle that most of us adapt: lavish and showy.

John Gokongwei, Jr. of JG Summit Holdings and one of the world’s wealthiest men has something to say on this matter:

"Especially when you start [and] you have nothing in your pocket, you’ve got to be frugal. If you want to make one peso and you spent two, you’ll never make it. You must be very stupid if you don’t know what you should save on. Sure you have to eat three meals a day and wear a pair of pants and a shirt. But when you have no money and you go karaoke or disco, I would call that stupid.”

"My existing knowledge is enough."

The inability to upgrade one’s self by attending trainings and other programs that could help bolster the business can be detrimental in the long run4.

As what the owners of established MSMEs has to say, those who don't improve themselves by learning significant business rudiments, especially in financial management and marketing may find themselves hampered in making significant progress and be on top of the competition unlike those who constantly seek fresh knowledge.

In the end, as they say, failure to improve one’s self breeds bigger failures in business because as time changes, every thing follows suit.

For starting entrepreneurs, the Negosyo Center which was the first law of former Senator Bam Aquino could provide a lot of assistance in terms of processing of permits, seminars and training as well as in marketing. The Negosyo Center is an attached program to the Department of Trade and Industry and can be found in the provinces, cities and municipalities across the country.

What now?

Entrepreneurship can be very tedious and frustrating especially at its early stages given the challenges it could entail. The list presented above are just some of the countless reasons why Filipino entrepreneurs fail even at the earliest start of their career. It is important to know ourselves and our capabilities as a person before engaging into business.

In addition, becoming educated in what business and how to do that business especially the MSMEs is also vital because they are most at risk of bankruptcy.

The great businesses in the country have their own history and it is the job of every aspiring entrepreneurs to know them and learn from them.

This article is accurate and true to the best of the author’s knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.

© 2014 Arni Abueva

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    • grand old lady profile image

      Mona Sabalones Gonzalez 

      5 years ago from Philippines

      You have made some very compelling points here, kabayan, including the imitation mentality. But in truth, while that mentality prevails, it's the little extra something you add to it that makes a difference. I allowed my maid to run a sari sari store in our house (the classic gaya gaya business). She doesn't pay us anything, because I believe in helping people to grow. But she is wise and knows her market. She started her business when she realized three houses were up for construction in our street. She knew what they like to buy and her partner, a driver across the street, is in charge of collections. I see her take notes of every client's purchase down to the last centavo. She works hard and I'm proud of her. A new house across the street is up for renovation, and she anticipates new clients there, too. I think she is realistic and knows that when these houses are built, her business will go down. But when the opportunity arose, she took it.

      The ukay-ukay business is another example of gaya gaya. But a lady who owned several ukay ukays developed Magarbo, a store in malls that sell the best of her ukay ukays. That is a unique twist to a similar sari-sari store mentality.

      Me -- I'm an artist, a writer and all I have is my talent. I need a manager. But who would manage a writer? So I do what I do best, and at the end, I will have accumulated a different type of wealth, but very meaningful wealth for me.

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