In a rapidly changing business landscape, the question of key success factors for independent entrepreneurs and members of organizations is becoming increasingly important. In an effort to find answers to this fundamental question, we speak with Adam Abramowicz, SME Advocate, and Pawel Tracz, Chairman of the Franchise Team at the SME Advocate – Polish Association of Microentrepreneurs and Franchisees, to explore this issue in detail from different perspectives.
What are the most important factors determining the success of independent entrepreneurs in the current business climate?
Adam Abramowicz: Entrepreneurship is a complex phenomenon. On one hand, there are factors that will work always and under all circumstances. By this I mean, first and foremost, the attitude of the entrepreneur, his ability to anticipate the needs of consumers, and with it: diligence, punctuality, honesty and the ability to work not only for other people, but also with them. It sounds idealistic, but it worked hundreds of years ago and will still work today. At the same time, certain circumstances are changing. At this point, one has to wonder, why do people go into business in the first place? Among the various factors, one is the desire to make a profit. This makes it so that if the chances of the assumed profit are hindered or even prevented by politicians or officials, fewer people will choose to be entrepreneurial and self-employed. So I would say that in addition to what will always work, there must also be the right conditions for business, a climate conducive to entrepreneurship.
Paweł Tracz: Entrepreneurship is not only a matter of individual determination, but also the conditions of the business environment. Fostering entrepreneurship requires the creation of an appropriate legal and economic climate that encourages innovation and development. Economic policies and regulations must be aimed at facilitating start-ups and growth for entrepreneurs, providing them with a stable framework. This is a key element in supporting dynamic economic development and job creation.
Are there differences in the determinants of success between independent entrepreneurs and those affiliated with various organizations?
A.A.: It is definitely easier for entrepreneurs affiliated with organizations. The point is not only that they have more social capital, a better network of contacts, a space to consult, even sometimes to chat, and after all, many an idea that was later realized was developed over coffee with friends. However, something else is important. Entrepreneurs who can organize themselves are also able to put pressure on those in power. And in this way make their work easier. An example is the Entrepreneurship Council, which operates at the SME Ombudsman. At the moment it’s more than 400 organizations, large and small, bringing together entrepreneurs or people who value entrepreneurship and want to promote it. When I speak on an industry topic, I can refer to experts from specific industries active in the Council. This allows my pro-entrepreneurial activities to shine through more effectively. The same works in favor of the organizations in the Council, which can take an active part in creating entrepreneur-friendly solutions.
It is also possible to do business all alone and see everyone as competition. Nothing prevents you from approaching it that way. Nothing except the market. The market promotes cooperation and is a place where you compete and cooperate with each other at the same time, and business organizations facilitate both.
P.T.: Through cooperation in organizations, I am also referring to the Polish Association of Microentrepreneurs and Franchisees, a Code of Good Franchise Practices has been created. Coming together in buying groups and developing in a franchise format reduces the risk of failure in business development. Independent entrepreneurs can bet on decision-making autonomy, while membership in organizations provides synergistic benefits and support. Lessons learned? Success depends on the business context and the choice of a strategy tailored to the specifics of the business.
How can SMEs compete effectively with larger companies?
A.A.: They can target areas or niches that don’t pay off for the big players. They can also rely on their faster decision-making ability, because let’s not lie to ourselves, the bureaucracy in large companies is sometimes extensive, too. They can offer short-run products or bespoke craft services, sometimes literally. They can also rely on ongoing customer relationships and sell something that a corporation won’t sell, which is individual attention. They can do it all at once. The possibilities are vast.
P.T.: One way to compete is through franchising. This option can be used by entrepreneurs who join a franchisor, as well as entrepreneurs who develop their business by becoming franchisors. For small and medium-sized enterprises, using such a model can be an effective competitive strategy for faster growth and expansion, using their resources and know-how.
Are there universal strategies that can be used by both independent entrepreneurs and members of an organization to achieve success?
A.A.: There aren’t. The market is too dynamic of a place. When it ceases to be dynamic, it ceases to be a market, something bad happens, and the best strategy then will be strategies to defend one’s assets. But there are some universal tips that will always work. You have to work for the customer, make sure they come to you a second time, and you have to learn all the time. The latter is easier when you meet other entrepreneurs. And also, this is why operating within an organization of some kind is invaluable.
P.T.: Yes, I agree with the previous speaker. However, economically, associating into buying groups, and developing in a franchise format, largely reduces the risk of failure.
What are the main barriers that independent entrepreneurs typically face, and how can they be overcome?
A.A.: Barriers range from market entry to the organization of the business itself, high start-up costs, bookkeeper costs, fees and rent for the company’s headquarters, and many others. Barriers multiply as the business grows. These are not only high financial costs, which should be met from the company’s profits. These profits should, of course, remain enough to make a decent living possible, but no one counts the burden with the mental cost, awareness of responsibility and fears about the future of the company.
An additional barrier is also the changing conditions of tax laws and the administrative difficulty of running a business. Poland is not one of the best places to do business, although it must be admitted that much has already been improved but many things are still waiting in line. It is easier to endure these barriers when you are affiliated with an organization representing the industry in which the entrepreneur operates. Then, certain costs can be shared, and solutions can be found more easily. Also, the voice of the entire industry, not just one small entrepreneur, is heard more loudly.
P.T.: From the available data, the small business sector currently contributes about 30% of Poland’s GDP. In contrast, the biggest challenges it currently faces are the complexity of the economic situation, uncertainty and considerable risk, and competition with chains and discounters.
Are there specific skills that entrepreneurs should develop?
A.A.: Undoubtedly, these are: patience, flexibility, a cooperative attitude and the use of synergy in action. Also, the ability to share the financial success of the company with its associates – is not insignificant. In addition, always the development of the company depends on the personal development of its leader, so the systematic expansion of the entrepreneur’s own competence will be the pillar of his company’s growth.
P.T.: A very important theme was raised about improving one’s competence. Sometimes the idea alone is not enough. Therefore, we also support educational activities, whose author is Dr. Marta Ziolkowska from SGH, the university conducts the only postgraduate program in Poland on “Franchise Management”.
How can the organization’s membership affect the growth and success of the company?
A.A.: Business or entrepreneurial organizations vary widely. Some offer only and as much as informal networking. It sounds modest, but contacts in business are an incredibly valuable currency. However, there are those that add to their offerings the agreement of common positions, the opportunity to lobby for solutions relevant to the industry or its region. Organizations have different goals and opportunities, the important thing is that once you sign up, you are not just a passive contributor. It is necessary to act. Personally, I was one of the main initiators, but also President of the Board of Directors of the Network of Retailers “Our Stores”, this was long before I became an SME Advocate. And the fact that we set up such a network helped its members to do better in business.
P.T.: On the social level, entrepreneurs should come together in industry groups, which gives more opportunities to represent and present opinions in statutory, legal and administrative processes. From my own practice, running the Polish Association of Microentrepreneurs and Franchisees, which belongs to the Entrepreneurs’ Council at the SME Ombudsman, I can say that this is very important, because we take an active part in consultations, we present opinions and problems. Together with the Polish Organization of Franchisors, we organize a dialogue between franchisees and franchisors, which brings very good results.
Are there cases where an independent entrepreneur can benefit from affiliation with an organization to increase his chances of business success?
A.A.: Certainly there are such cases, although probably more on an informal level. However, it’s better not to count on casual help and simply enroll in an organization whose mission, goals and values match the needs of a given entrepreneur. P.T. Yes, I support this position. Nowadays there is something for each entrepreneur, one of the solutions may be to join the Regional Chamber of Commerce in Katowice and such organizations.
How can organizations for entrepreneurs adapt to changes in the marketplace and remain competitive in the face of dynamic business conditions?
A.A.: In a nutshell: you need to monitor the market. Board members of such organizations must be experts so that they can anticipate changes in the economy. Without such knowledge, the organization will serve its members poorly. But that’s not all. One must be open-minded and keep in mind that business attracts different people. We will never get along with some of them on a personal level, but on a professional level they can be valuable collaborators who know something we don’t. We also need to look at what is happening in industries cooperating with ours and in other countries, because maybe their solutions are valuable and worth transplanting to us. In other words, to adapt, you need knowledge. But this is only half of success. The other half is the ability to use it. Here it is useful to be aware of one’s own limitations and have an attitude of a certain humility towards the market. Yes, you need to defend your opinion and your solutions, but sometimes it is much better to implement novelties.
How can we leverage relationships with other entrepreneurs and organizations to make our business grow?
A.A.: Certainly in several ways, but behind each of them will be one of two phenomena. The first is economies of scale. It is easier to produce, sell or provide services when our business at least to some extent begins to be repetitive, possible to be written into a procedure and, above all, when we produce or sell a lot. Then, we can more easily make money by turnover rather than by margin, but to get to this state, we need knowledge of how to develop our business. Such knowledge exists scattered in the market, which is why it is worthwhile to look up to others and test their solutions at home. And here we come to the second factor, which is social capital. Colloquially speaking: “acquaintances.” Business grows more easily when an entrepreneur is surrounded by a network of contacts. More contacts mean more opportunities, including in business development.
P.T.: It is worth emphasizing the effect of scale, which is definitely easier to develop through franchising. It does not matter whether we are a franchisor or a franchisee – quantity combined with quality will always make a good result.
Some say that innovation is the key to success in business. Is it really?
A.A.: It is important, but I caution against glorifying innovation, because it does not automatically mean profit. There are industries that can be non-innovative, produce something just as it was hundreds of years ago and still be profitable. The goal of business is not to cross the barriers of the known and transgress. An entrepreneur is not a painter or sculptor or a modern filmmaker. At the same time, innovation can pay off, and there are industries that are based on inventing new solutions, sometimes even inventing whole new sectors of the economy. But even there, change for change’s sake is not an end in itself, but only a means to an end, which is profit. And so it should be in business.
P.T.: It is worth noting the trend of innovation and the development of digital and digital processes, which are difficult for a single entrepreneur to access. Therefore, organizations can demonstrate a system of training for entrepreneurs, and can provide advice on which processes are best to invest in.
And what is the outlook for small and medium-sized enterprises in the coming years, given changing trends and challenges?
A.A.: In some ways, it will be as it has always been. The coming years promise many opportunities, but also bring some challenges. It’s a truism, but I use it on purpose. Because it has worked in the past, but it will also work again. Every era brings new challenges, new opportunities and risks. It is the role of entrepreneurs to adapt to them and help the rest of society to do so. As SME Advocate, I am ready to support small and medium-sized enterprises in coping with this dynamic environment. Investing in digitization, developing flexible business models and environmental awareness will be key. The latter must be distinguished from stopping development in the name of ecology, and these are two different things. Everyone wants to live in a clean environment, but that doesn’t mean we should be indiscriminate, if only about clean transportation zones or ESG reporting. My job is to defend the rights of entrepreneurs and, consequently, to enable them to effectively adapt to changing market conditions. The SME sector is dynamic, seeks new solutions and can adapt. As long as officials give it room to operate, I see the prospects as positive.
P.T.: In the coming years, the SME sector will face challenges from the rapid pace of technological change and dynamic market trends. However, by adapting to the changing business environment and using innovative strategies, there is significant potential to achieve growth and success in the market.
Interviewed by Kamila Zdrodowska, PhD, Director of the AriKaSo Education Center
The interview appeared in the March issue of Business HUB.