The start the business and get stuck at

The PCA revealed that the most crucial obstacle for business start-up of new SMEs in NWP is largely internal to the firm(Financial issues). Surprisingly, the second most critical obstacle,management, is also an internal factor to the business environment. Small and Medium Enterprises is a vast developing sector and is the backbone of Sri Lankan economy.  Presently, the commercial marketplace is characteristically awashwith resolute entrepreneurs stepping into the startup eco-system of thecountry, collectively driven bya productive eagerness tocarve out a commercial niche and get a head-start on the road to success. Starting up a business in Sri Lanka is not a daunting task.

A recent report compiled by the World Bank Group indicates an improvement in Sri Lanka’s ranking as a potential destination todo business, having ascended tothe 111th spot out of 190 in the ‘Doing Business Index’ for theyear 2018.  Accordingly, the start-up process in Sri Lanka nowfeatures only nine pertinent steps, all of which take ten days (on average) tocomplete. The first eight steps are: (1)reserving a name; (2) appointing directors and acompany secretary; (3) registering with theRegistrar of Companies; (4) giving public notice of incorporation; (5) registering with the tax authorities; (6) registering forVAT; (7) payment of stamp duties; and (8) registering with thelabor department (World Bank Group, 2018). Most of the respondents inthe survey (55%) have not obtained their business registration under governmentauthorities.  This is mainly because they find that businessregistration is a costly, time consuming and unimportant activity.

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SME owners do not have a plan for their business. However, theystart the business and get stuck at the middle without being able to grow to the next stage of its lifecycle. Hence, most of the enterprises get shut down and do not grow into large scale businesses.  Many SMEs are of first time entrepreneurs, and they do not have sufficient bandwidth in all the functional areas. Theyare not able to estimate their own short-term and long-term needs accurately with all the uncertaintiesthey encounter. Sri Lankan SMEs have not made great progress in the past. Theystill struggle with tapping financial management.

 In most cases, SMEs are founded byentrepreneurs who are not managersthemselves but they struggle to manage them due to the sole fact that they are the founders. Care must be taken often to study, organize, plan and control all activities of business operations. Most SMEs rely moreon mental records and therefore, unable to prepare proper or up-to-datefinancial statements that canbe used as evidence of profit and lossearned/occurred and wealth ofthe business including the workingcapital.  This problem is even made worsewhere the entrepreneur, as the founder, manages without the required managerial skills.Therefore, the study suggests that it is needed to provide up to date trainingprograms to SME owners, government SME supporting agencies (such as NationalEnterprise Development Authority) should be vigorously marketed to createawareness among the public, introduce lower interest rate plans for loans,introduce new technology, improve infrastructure facilities and revisit the micro financeaccessibility of SMEs and formulate effective financial management plansthrough closely monitoring and supporting SMEs in NWP within their early yearsfrom the inception to avoid failures. 

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