Cooperation as a Lifeline for Small and Medium-Sized Business

June 26, 2020

Photo: Sergei Gapon/UNDP Belarus

Liudmila Sakalouskaya, Project Manager, “Support to Economic Development at the Local Level in the Republic of Belarus”

How can I raise additional finance and find new employees? How can I reduce the costs of equipment and raw materials, enter new markets and find customers? Any entrepreneur asks these questions while thinking about developing or expanding their business. In the situation of limited access to finance, time and human resources, cooperation of small and medium enterprises (SMEs) could be a solution.

International experience shows that cooperation is one of the most effective tools for promoting entrepreneurship. By joining forces, small businesses get more opportunities and prospects for their growth as cooperation fits the equation ‘2 + 2 = 5’. There is no mistake here. Cooperation produces a synergy effect – what a small business cannot achieve on its own, it can achieve in partnership with other businesses.

What are the benefits of cooperation for SMEs?

The main benefits of cooperation are reduced costs and added value of goods/services resulting from the economies of scale (achieved by increasing the scale of production/supply) when SMEs jointly conduct an advertising campaign, operate at full capacity, and enter the market as large suppliers. In addition, there are other positive effects of cooperation.

Firstly, cooperative entrepreneurship significantly increases capacity and competitive advantages. For instance, it is easier for a craftsman cooperative to change production compared to a large souvenir factory.

Secondly, cooperation can reduce the cost of purchasing the necessary equipment. For example, a digitally controlled woodworking machine is very expensive, so it would be less expensive when purchased jointly by the cooperative participants for shared use, rather than by one owner.

Thirdly, cooperation reduces labour costs since the costs for bookkeeping, marketing or design services are lower for several participants than for each individually.

Fourth, consolidated effort makes product promotion easier and more efficient. For example, it is more cost effective to introduce a shared e-Commerce platform for selling goods supplied by participants, rather than doing it on one’s own. In addition, each of the participants has a lower risk of failure, since a wider range of goods and services offered by the participants on the platform reduces the risk of a consumer’s lack of interest in shopping at this marketplace.

Some have already done this.

In our country, cooperation is currently at the formation and development stage. It is mainly used in agriculture, tourism and the financial sector.

An example of successful cooperation is the consumer agricultural supply and sales cooperative VESKOP, based in the Stolin District of the Brest Region. This cooperative brings together more than 3,000 private farms and leads a successful vegetable business, exporting their products to other countries.

Another example is the cooperation of owners of agricultural estates and smallholder farms, farmers, artisans, tourist recreation complexes, folklore groups and historical reenactment clubs in four districts of the Brest region. Cooperation between businesses in the tourism sector helps to increase the profitability of the sector in the region by expanding the range of tourism services according to the needs of various target groups of tourists, e.g., such offers as stay programs for active and family recreation, gastronomic and historical tours, cycling, boat tours and hiking, and even horse riding.

Support to cluster initiatives contributes to the development of SME cooperation

Already today, businesses with cooperation plans may receive financial support for the implementation of their initiatives. It is indeed cooperation that forms the foundation for cluster initiatives. The Call for Applications in support to entrepreneurship development for the provision of financial support to such initiatives was announced on June 5, 2020 under the Project “Supporting Economic Development at the Local Level in the Republic of Belarus”, funded by the European Union and implemented by the United Nations Development Program in partnership with the Ministry of Economy of the Republic of Belarus. More information about the Call for Applications is available here

In order to build the capacity of applicants planning to participate in the Call for Applications, the Project has developed the Guidance on SMEs Cooperation. It will help entrepreneurs to understand the benefits of cooperation and learn about the necessary activities and steps to establish successful cooperation. The publication of the Guidance will take place in the next few days.

The recipe for success of business cooperation has the following ingredients:

●       Common goals for all participants;

●       Mutual interest in the final results among all participants;

●       Trust between the participants in the cooperation;

●       Fulfillment of commitments undertaken by each participant; and

●       Constant communication between participants, enabling an adequate and timely response to changes within their cooperation and external socio-economic conditions.

Given that, it is cooperation that can throw a lifeline for SMEs in the current difficult economic realities.