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The Secrets of SME Success

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The UK is a hotbed of entrepreneurial talent, but in today's tough markets, not all small businesses make it.

To understand the secrets of SME success, BT Business commissioned a report with Alain Samson and Thorsten Roser, from London School of Economics. They investigated how and why key decisions made by Small and Medium Enterprises (SMEs) have contributed to some being significantly more successful than others.

The report analysed and compared the following businesses:

The Body Shop - the ethical cosmetics retailer which was sold to French cosmetics giant L'Oreal in a £652 million deal

Last FM - the internet radio and music community and one of the world's largest social music platforms which in May 2007 announced a £140 million take over by American media giant CBS

Webvan - an online credit and delivery grocery business that was started at the peak of the Dotcom boom but went bankrupt in 2001

Key Report Findings: The Dos

1) Be Different

The Body Shop has proved that by being able to distinguish yourself from competitors you will increase recognition. They did this by setting up new business units across the world and in doing so, The Body Shop has come to occupy the niche of ethical retail in health and beauty.

Last FM also achieved difference by becoming one of the first websites to allow artists to have their music streamed online. They now make a profit through advertising and selling to affiliates.

2) Collaborate

Last FM had to make the public aware of their website and find a way for people to listen without involving the music industry. They realised they needed a partner to achieve this and by working with Audioscrobbler (a system that builds personal online music profiles by monitoring what users play on their computers) Last.fm were able to boost awareness and their profile.

3) Have The X Factor

There needs to be a reason why people would buy from your business, it isn't good enough to be the same as others on the market, you need to be better.

The Body Shop achieved this by combining an issue, which people feel very passionately about: the environment, with health and beauty products.

4) Get help from others

SMEs need to focus on their business, increase turnover, and improve quality and one way of doing that outsourcing services such as IT and telecommunications. This allows SMEs time to concentrate on building their business and not worry about tasks such as fixing computers.

The Don'ts:

1) Over Promise

Webvan's marketing promised to deliver products to customers' homes within a 30-minute window of their choosing. Unfortunately, their operations could not adequately live up to that promise, which fundamentally let down customers and lost business.

2) Ignore Strategic Partners

The main mistake Webvan made was to try and build everything on their own, instead of partnering with existing supermarket chains, wholesalers, or a network of independent grocers. Even though Webvan was popular, the enormous amount of money spent on infrastructure far exceeded their sales growth.

The conclusion of the report showed any new SME has a number of factors to consider when analysing how to become successful. Having a dynamic and original idea is important, as is using the help of others where necessary.

"With so much entrepreneurial talent in the UK, many people are looking to start up their own businesses. Alongside having great ideas, businesses need a support team to help them concentrate on what they do best. At BT Business we're dedicated to providing IT and comms services and solutions which are designed to help small businesses compete and thrive." said Bill Murphy, Managing Director for BT Business."  


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