How to Set Up Your Small or Medium-Sized Business

The thought of setting up a small or medium-sized enterprise (SME) may have crossed your mind from time to time, with the idea of owning your own income-generating project is a compelling one. The project may even be an additional source of income if you already have a job that you are happy with. While planning your project, you may have hesitated once you realized that there are many issues that must be identified and studied at the beginning or perhaps you are wary of risking of borrowing funds.

The importance of SMEs both in Jordan as well as globally has increased, not only because of their substantial contribution to the national economy, which exceeds 40% of the GDP, constitutes more than 95% of all companies operating in various economic sectors and employs 60% of the workforce according to the latest data issued by the Arab Monetary Fund, but also because of their “main” function in the Jordanian economy, which has witnessed over the past few years internal and external challenges due the on-going political instability in the region.

And now for the most important question...is your company classified as an SME?

There is no specific global agreement on the classification of SMEs. In the United States of America, for example, the definition of SMEs varies depending on the industry. In manufacturing, SMEs are defined as having 500 employees or less, while in the wholesale trade it is usually 100 employees or less, whereas a business involved in silver ore mining can have up to 250 employees. However, the European Union provides a clearer classification, defining a small company as one with less than 50 employees, and a medium company with less than 250 employees. As for micro-enterprises, these businesses employ 10 or fewer people.

In Jordan, the Central Bank of Jordan defines small enterprises as projects that employ between five and 20 employees, and whose total assets or sales volume is less than JD1 million annually, while medium enterprises are defined as projects whose total assets or sales volume is between JD1 million and JD3 million, with employees ranging from 21 to 100.

Tips for setting up an SME

In their early years, many SMEs face setbacks, and the risk of failure. To pass this stage and navigate of eventual success and continuity in the world of entrepreneurship, here are the following tips:

1- Study the market well

By studying the market, you understand your competitors and your customers. You also identify the additional service that your company's product provides and what will drive customers to replace your competitor’s product with your own. It is vital to conduct a comprehensive market study in order to gain in-depth knowledge of all the factors that will affect your company and your product.

2- Set goals and a clear vision for the future, and start writing a business plan

Having a clear vision and goals at the start of the project will help you overcome many obstacles and difficulties. Your vision is your compass, guiding you along the way and driving you forward. Creating a business plan for at least the first three years will help you achieve the goals you have set. Be realistic in defining your goals and when drafting your business plan, relying on the indicators uncovered in the market study.

3- Educate yourself financially and legally or seek the help of experts in the field

Educate yourself in the financial and legal aspects of your business before seeking financing for your project and consult with experts in these areas. You should also keep legal documents and financial statements that help you present your project in an optimal and realistic manner so that you gain access to a variety of banking services, including credit facilities.

4- Finance your project

The problem of securing sufficient liquidity is one of the major challenges that you will face when launching your project, but since you are now more aware, and more knowledgeable of the financial and legal aspects, you should also know that there are many financing options that provide you with the necessary liquidity, the most important of which are self-financing, crowdfunding, angel investors, venture capital, business incubators and accelerators, entrepreneurship programs, bank financing, microfinance loans, grant funding, as well as other sources of funding such as the pre-sale of the product or the sale of any of the project assets.

5- Avoid overspending as much as possible

One of the most common reasons for the failure of a new company is the lack of proper financial planning and over-spending at the beginning of the project. Therefore, you need to keep your expenses as low as possible so that you can launch your project and earn profits.

6- Study the production inputs

The study of production inputs and continuous supply methods is vital to ensuring that the final product provided to your customers does not fluctuate in terms of price, quality and uninterrupted supply, thus it is essential to have multiple sources of inputs to avoid stopping the production wheel.

7- Focus on one area before expanding

Your ambition at the beginning of the project may lead you to think about expanding and launching more than one production line in multiple markets at once, but you should slow down and focus on a specific market and one production line, learning from your experiences, increasing your revenues, and then expanding into larger areas and more markets.

8- Pay attention to the behavior and preferences of your customers

Customers are at the core of any business process, so you need to pay attention to their behaviors, preferences, and feedback about your company's products.

9- Train your employees and workers and make sure they are qualified

Develop an appropriate training and qualification plan for your employees and workers, which will ultimately allow them to succeed in their jobs and enhance their competencies and expertise.

10- Use technology that allows you to provide the best physical and digital experiences.

And, finally, be positive!

At the Housing Bank, we are aware of the important role that SMEs play in supporting economic growth in the country, and we seek to harness all our experiences to support their growth and help them create new job opportunities. We are also major contributors to the Central Bank of Jordan’s SME support program, helping finance business programs that contribute to their revitalization. Additionally, we offer a number of financing solutions that allow SMEs to acquire the necessary funding to run their businesses and continue their activities at normal levels, as well as allowing them to eventually expand.??