Small and medium enterprise development | KPMG | GLOBAL

Small and medium enterprise development

Small and medium enterprise development

Small and medium enterprises are the engines that keep cities growing. In the EU, SMEs account for 99 percent of all enterprises.

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Small and medium enterprises are the engines that keep cities growing. In the European Union, SMEs account for 99 percent of all enterprises, employ two-thirds of all workers and contribute more than 50 percent of a city’s gross value added. In the emerging markets, their value tends to be far higher. No wonder city leaders around the world are making SME development a high priority.

Defining the service

Small and Medium Enterprise (SME) development services are focused on helping new businesses — typically startups — establish and grow their enterprises. Services may include a wide range of activities from the provision of business advice and networking support through to the development of financial and non-financial incentives and investment into supportive resources and/or infrastructure.

Topline findings

  • The average city spends US$330.10 per SME consultation.
  • The median cost per SME consultation is US$125.21.
  • Spend per consultation ranged from as low as US$1.16 to US$1,456.57.
  • There is considerable variation in the range of SME development services provided by cities which directly influences cost.

Benchmarking analysis

Efficiency
Operating and capital cost per SME consultation. This measure combines reported operating costs and capital costs for SME development services and divides the total by the number of reported consultations.

Points to consider:

  • The cost per SME development consultation appears to range quite widely from a low of US$1.16 to a high of US$1,456. In trying to investigate the outliers associated with these costs, KPMG could only come to the conclusion that the type of service output offered by one city might vary considerably with that of other cities. For example, if a small firm had a telephone conversation about how they might seek financial support from the city, this might count as one consultation. Another city might include an in-depth analysis of the small firm’s competition, specialized training on developing business plans, and grant money to raise investment monies. This latter example would clearly not be comparable to the simple telephone conversation but would count as a single interaction in the costing equation. The difference in consultation would clearly account for the difference in costs.

Operating and capital cost per small and medium enterprise (SME) consultation

Effectiveness

Interestingly, very few cities participating in our benchmarking exercise seem to measure the annual change in employment created by SMEs. While other measures may be more readily available, this suggests that city leaders may not know the actual impacts of their investments and their influence on employment, tax revenues and service demand.

Persistent problems

  • Coordinating support across multiple service areas
  • Removing barriers to entry for startups
  • Awareness by the SME that the City offers support services
  • Increasing SME participation in local economies
  • Reducing regulatory hurdles and streamlining processes
  • Improving City digital service delivery capabilities
  • Encouraging corporate investment into local SMEs

Distinguishing cost factors

  • Sophistication and depth of service offering
  • Extent to which financial supports are granted
  • Level of private sector investment
  • City’s investment in SME Development Service

Innovative ideas

SMEs in Adelaide enjoy a ‘one-stop-shop’ window that provides business advice and support to help entrepreneurs start and grow their business and navigate the applicable regulatory processes.

Authorities in Kazan have arranged ‘rent holidays’ for small businesses, offering relief from rent on municipal properties for up to five years. 

Entrepreneurs in Poznan can use Poland’s first ‘free urban co-working space’, a collaborative environment for around 30 people, supported with free Wi-Fi and a ‘hot desk’ to encourage collaboration while chilling out.

The City of Philadelphia has created the Capital Consortium and Biz Coach programs to help increase investment into small (primarily minority-owned) neighborhood-based businesses. The city has also focused on high school and college students providing them a bridge to the business world through.

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