Dynamic and adaptable SMEs are helping to lower unemployment rates, earn foreign currency, improve the knowledge profile of the workforce, enhance company management abilities, and disseminate technology information throughout Pakistan.
According to some reports, developing countries have a higher rate of SME failure than wealthy countries.
Furthermore, prior research have shown that the majority of new SMEs failed during the first five years of operation.
Small entrepreneurs in Pakistan confront numerous challenges despite their importance and crucial contribution to the nation's economy.
Entrepreneurs face numerous challenges that limit their long-term viability and growth.
Small entrepreneurs deal with a lot of issues, and starting a company without taking the difficulties ahead into account is one of the worst things a would-be owner can do.
Learn About The 5 Greatest Challenges Small Entrepreneurs Face in Pakistan
Below, we've covered a few of the typical difficulties experienced by small entrepreneurs in Pakistan. You can prepare and overcome these typical problems by being aware of what you can encounter.
1. Access to Finances
Everybody has to have access to enough cash to pay their payments, and this is true for both businesses and individuals.
Your life or your business will probably end up becoming a capital drain that puts pressure on the other.
Small business owners must either be well financed or earn extra money to supplement financial reserves as necessary to prevent this issue.
Due to this, the founders of many small businesses start the company while also holding down a job. While having a dual focus might make it difficult to expand a firm, running out of money makes expansion impossible.
When money is coming into the company, money management becomes even more crucial. Even while most business owners can probably handle their own accounting and taxes, it's typically a good idea to have expert assistance.
Getting help with the bookkeeping helps protect it from becoming a barrier to growth because a company's books become more complicated with each customer and employee.
Additionally, asymmetric knowledge prevents both individual and institutional investors from funding SMEs.
Due to the lack of clear procedures or regulations for SMEs on the correct disclosure of their company information to investors, investors are always cautious to participate in small businesses.
Additionally, the local government's land acquisitions and other limitations make conducting business in Pakistan expensive.
Due to the high cost of land, people's attention is shifting to other industries, such as real estate, where money is spent on pricey land that is utilised to expand enterprises.
Furthermore, government regulations favour large corporations while ignoring small businesses.
Despite numerous State Bank of Pakistan (SBP) programs targeted at enhancing local enterprises' access to credit, access to capital remains a barrier for SME.
A direct governmental initiative to improve SMEs' access to credit is the SBP's Prudential Regulations for SMEs and Policy for Promotion of SME Finance.
2. Social Constraints
The social constraints, or more specifically, the type of culture system that is prevalent in Pakistan, are another extremely common issue that is frequently addressed.
The young person must have a strong focus on their family. Even while modern society favours education and is more liberal than it was in the past, there are still some things that should never be tolerated.
For today's youth, this presents a challenge. Parents have a voice, and not just a voice, nearly complete power over the choices their children make in life, particularly when it comes to their career.
Since they are the ones who provide funding for their children's enterprises. There is less room for taking risks in life because of the push to settle down early in life in terms of marriage, children, and families.
In Pakistan, there are further social expectation on women which hinder them from starting or running any business. Lack of childcare facilities provide difficulties for women to leave their children and run their businesses.
3. Hiring and Managing Employees
Entrepreneurs who wish to grow must seek assistance. You can't do it all by yourself after a while.
Finding the ideal candidates, however, is a difficult task, particularly in the early stages before you have your own human resources department and procedures.
You must learn how to recognise the kind of people you require, evaluate them, and integrate them into your operation so they become essential members of your team.
To avoid having employees who really impede your success, take the time to carefully assess candidates' qualifications.
Entrepreneurs train their staff on how to accomplish the objectives of the company in their capacity as its founders and leaders.
They can accomplish this by creating explicit, comprehensive guidelines for each role. Employees may have a better understanding of what to expect and what they're working toward when an entrepreneur properly communicates the organization's goals.
Entrepreneurs may supervise the recruiting process to ensure that they select candidates who will work hard and care about the mission of their firm. To draw individuals whose credentials meet the organization's particular needs, they might publish incredibly thorough lists.
They can design interview questions in advance to see whether a potential hire would be a good fit for their company and whether the position will further their professional objectives.
However, it can be difficult to locate qualified, dedicated workers. Your small business' benefits package won't often be able to compete with what big businesses have to offer.
Additionally, you could require workers that can manage a variety of duties, whereas huge organisations might recruit staff for a single specific duty.
Additionally, given the frequent change in small business environments, you'll probably require employees with the right personalities. Finding the ideal staff might be difficult because of all of these reasons.
4. Delegating Leadership Responsibilities
You must correctly assign tasks and responsibility to your new hires; simply hiring them is not enough. The temptation for an entrepreneur is to try to handle everything themselves, but this is counterproductive and will restrict the expansion of your business.
Strike a balance between keeping an eye on the company and placing your trust in others to complete tasks.
A company has a deadline if it cannot function without its founder. Many firms experience founder reliance, which is frequently brought on by the founder's inability to delegate certain choices and duties as the company expands.
Entrepreneurs that have a successful business may think about collaborating with other experts or companies.
There are numerous factors to take into account, even though this can help them distribute leadership tasks and enhance funds.
Entrepreneurs can first evaluate areas for improvement, determine whether a partnership might be helpful, and consider how their individual abilities and personalities might work well together to advance the company.
To safeguard the interests of all parties, it is crucial to set the partnership's conditions with legal counsel.
Theoretically, overcoming this difficulty is simple—a firm owner only needs to delegate greater authority to staff members or partners.
However, in fact, this poses a big challenge for founders because it could entail sacrificing initial work quality while the individual is still learning the ropes.
5. Lack of Relevant Education and Skills
The bureaucracy surrounding schooling is another issue young businesses in Pakistan must deal with.
Many institutions of higher learning don't care about the actual side of business; instead, they exclusively concentrate on the theoretical parts of entrepreneurship and company.
These institutions' instructors are unable to comprehend the value of entrepreneurial concepts that add ease of doing business and strategy to an entrepreneur's toolkit. Their exclusive focus is on disseminating theoretical information and finishing the obsolete curriculum.
Sadly, this is inhibiting students from thinking creatively and developing original business concepts. These teachers frequently lack any real-world business or market knowledge.
Therefore, the absence of entrepreneurial competencies, a lack of an entrepreneurial business network, and a lack of dynamic capacities are the key obstacles faced by SMEs in Pakistan. These issues account for the sector's poor performance.
Particularly in the contemporary business climate, economies are transitioning from production-based to knowledge-based economies. Utilizing available knowledge-based resources is therefore necessary.
The performance of SMEs can be improved by having skilled staff. Through innovation and the use of new manufacturing procedures, formally educated and skilled people can improve a company's productivity.
The quality of human resources used in SME in many developing nations, such as Pakistan, is typically lacking in the desired knowledge and professional abilities, especially in market analysis, marketing and product creation as well as business planning and financial management.
Since the manufacturing industry in Pakistan employs the biggest percentage of unskilled workers (about 80%), compared to its competitors, skills development requires sustained effort.
There are institutions with a focus on improving the productivity of human resources, such as TEVTA, NAVTTC, NPO, and PITAC, however there is a mismatch between supply and demand.
Additionally, a number of provincial institutions run training and capacity-building initiatives at the provincial level throughout Pakistan.
To integrate human resource development initiatives with the actual needs of SMEs in line with global trends, policy measures must be developed and put into place.
In order to teach students about the realities of conducting business, there is an urgent need to invite the business community into educational institutions (even on a visiting basis).
This will support students' learning of business strategies and their ability to act creatively in a hostile setting.
Becoming a Successful Entrepreneur in Pakistan with Markaz
At Markaz, we are putting a lot of effort into accelerating Pakistan's eCommerce sector.
The social commerce revolution is being introduced to Pakistan through Markaz. We are an online store where you may acquire some of the top goods that your clients require. Start your own online business, sell these items there or to friends, and work from home.
We oversee the processes for delivery and cash on delivery and ensure quality-related returns and reimbursements.
In Pakistan, just 20% of the workforce is made up of women. We enable Pakistani women to participate in the workforce and the economy by having a community of resellers made up of at least 50% women.
Every Pakistani who wants to create their own business can do so thanks to Markaz. We offer high-quality items that have been specially selected at a discount. Our members benefit from the freedom of working from home, spending more time with their family, and becoming a part of Pakistan's flourishing small business community.
Markaz provides a platform that allows you to easily overcome the common challenges many small business owners face.
With zero investment requirement, Markaz allows individuals to overcome financial burdens that opening your own business can have.
Social constraints are easily dealt with by offering Markaz resellers the flexibility and freedom to work from home and how they wish.
Your reselling business is so easy to manage that you will not require any additional employees as you can sell with ease to your social networks through Facebook, WhatsApp, Instagram, etc.
Furthermore, Markaz is working on creating the Markaz Academy to offer the knowledge needed to run a business, as well as provides assistance through posts, videos, and the like for your reselling business.
Download the Markaz app today and become a part of the community today!