Around the world, it can be said that small business performance is a driver of inclusive and sustainable economic growth. Small businesses drive economic growth growth due to their creation of employment opportunities, their use of resources and their generation of revenue. Yet in developing countries, such as South Africa, small business growth rate and performance is undesirable, in other words, they do not grow in a way that is profitable. The question therefore remains, that if small businesses are so integral to a nation's functioning, why is it that so many small businesses lack the resources to grow and lack access to funding?
Your network is your networth
It is natural and expected that small businesses are often faced with resource constraints, and so informal and formal networks that SMEs have access to, are key determinants of their success. The size and nature of a business's entrpreneurial network influences its access to resources and its ability to improve its products. Small businesses that lack growth and end up failing, often do so due to lack of a network that could have provided adequate resources and funding. The impact of these networks on small business success, has been proven time and time again and has been expressed in a theory called The Networking Theory (Johanson and Mattson, 1988), which says that entrepreneurial networking causes enhanced small business performance.
What is entrepreneurial networking?
Entrepreneurial networking is the process wherein entrepreneurs interact with one another in both formal and informal ways, with the overarching goal of helping one another with business. The forming of these networks establishes ties between entrepreneurs and their customers, financial institutions, suppliers and any other support that may enhance business performance. These networks are particularly useful in developing countries, such as South Africa, where access to resources is typically limited and where formal institutions are reluctant to deal with SMEs.
How do these networks support SMEs?
In a developing-country-context, these networks are typically of an informal nature and are used to attract customers and transact with creditors and suppliers. These networks create a positive cycle, wherein entrepreneurs gain access to resources and to industry roleplayers, which then improves business functions, stimulates innovation and improves overall performance.
Many small businesses lack access to capital and to resources, and these networks grant and improve access to skills, knowledge and opportunities that help small businesses to unlock their potential and to becoming increasingly innovative. These networtks connect aspiring entrepreneurs with potential investors, funding sources and venture capitalists. This sudden access facilitates knowledge sharing, and then improves business credibility, which increases bigger businesses' level of trust in small businesses, which furthers the cycle of knowledge- and resource-sharing.
Not only does the level of access for SMEs grow exponentially through these netowrks, but so does the opportunity for collaboration. Partnerships are often formed via these networks, which leads to cost-sharing and improved capacity to take on larger projects. This helps SMEs in being able to compete with much larger industry roleplayers.
Lastly, these networks, through expanding and soldifying, can serve as a safety net to smaller businesses in times of crisis. This saftey net can be in the form of financial aid, emotional support or crisis management advice from more experienced roleplayers.
Why should entrepreneurs build networks?
People that are business owners or managers in any capacity, should make a conscious effort to establish these networks, in order to better understand the business environment in which they operate. A better understanding of your external environment, naturally means that any innovations that follow, will be relevant and have a higher likelihood of succeeding. Innovation is an immediate outcome of establishing an entrepreneurial network.
Your assets are nothing without your network to grow them:
Running a small business is no small feat. Between managing day-to-day operations, keeping customers happy, and planning for growth, it can feel like you're carrying the weight of the world on your own.
Entrepreneurial networks exist precisely for moments like these - to connect you with the people, resources, and knowledge that can take your business from surviving to thriving. Whether it's a supplier who extends you credit, a fellow entrepreneur who shares a game-changing insight, or an investor who finally sees your vision, these connections are the backbone of sustainable small business growth.
In a country like South Africa, where access to formal funding and institutional support can feel like an uphill battle, your network isn't just helpful - it's essential. It's your safety net, your sounding board, and your springboard all rolled into one.
So be intentional. Show up. Make the call. Attend the event. Because the businesses that grow aren't always the ones with the most capital - they're the ones with the most connected, committed people behind them. Your next big breakthrough might just be one conversation away. Keep life simple - and keep building those connections.
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