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BDS Q&A

1) How many BDSPs currently exist in Pakistan (rough idea)? Is it possible to know a general profile?

In 2009, Firms Project conducted rapid assessment of BDS landscape in Pakistan. The analysis was based on databases collected from sources listed as follows:

i. Consultants’ Database of Business Support Fund (BSF), 2009.

ii. SMEDA Consultants’ Database, 2009.

iii. Agribusiness Support Fund Consultant Database, 2009.

iv. CVs of Respondents to Senior Experts Advisory Services (TUSDEC), 2008.

v. Trade Directories

vi. SME Consultants Directory (European Union), 2006

Although it was not an exhaustive exercise it did gave us a much clearer picture on BDS landscape in the country. Information for more than 6,000 BDS providers were taken from the above databases and collated according to the districts in which they operate; various sectors they claim to cover, and the categories of services they offered. On cleaning up of these databases and removing multiple entries the number slid to 1,300 BDS providers. Later on, a verification exercise was carried out on phone resulting in further reduction in number of BDSPs to approximately 700.

The general picture emerging out of this analysis shows that BDS providers are predominantly operating in large urban centers of Lahore (38%), Karachi (20%) and Islamabad (8%). Rest of the districts had less than 5% of the BDS Provider spread. The concentration of BDSPs around these three urban centers does not restrict their ability to provide services in the industrial cluster across Pakistan.

Sectors covered by these BDS providers were:

1. Agribusiness

2. Ceramics

3. Chemical & Petroleum

4. Construction

5. Food & Beverages

6. Furniture

7. Gems & Jewelry

8. Horticulture,

9. IT & Telecom,

10. Leather & Leather Products,

11. Light Engineering,

12. Livestock & Dairy,

13. Mining,

14. Pharmaceutical

15. Sports Goods,

16. Surgical,

17. Textile.

2) Are there specialized BDSPs to provide different types of services i.e. training, linkage with financial institutions, technology, etc.

Spread of services for BDSPs in the databases is shown in the following diagram. Understandably, the functional areas that came out from the analysis of databases represented requirements of the source organizations more than the real service needs of SMEs. Approx. 70% of BDSPs in databases offered training and technical assistance, followed by 23% unidentified.

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3) What kind of services do they provide to the businesses?

Column three in the following table gives the list of commonly available BDS in Pakistan. When these services are compared to the BDS needs of SMEs (column 2) the gap between the demand and supply of services becomes apparent.

No Demand Diagnosis Diagnosis Based Services (BDS needs of SMEs) Existing Services Menu in Pakistan

For differential advantage of client’s products or services in the market place

Marketing/Branding, Distribution, Packaging, Product Development, Pre/Post Sale Services (in addition to Core Product/Service), HR Management • Business Match Making Services

• Company Registration Services

• Business Plan Making Services

• Leasing Services

• Marketing Research

• Event Management Services

• Lawsuits & contract enforcement

• Tax consultation,

• HR Recruitment & Head-hunting

Services

• HR Training & Development

Services

• Chartered Accountancy and

Financial Services

• Product Development and

Process

• Improvement Service

Software

• Development & Quality

Assurance Certification (ISO, CE etc)

• Marketing/Branding Services,

• Technological Enhancement

Services

2 For cost efficiencies of the client

Auditing (Process, Marketing, Financial), Legal and Tax Consulting, Technology Improvement (Energy Efficiency, Productivity, Waste Management, By-products), HR Capacity Building and Management

3 For redesigning a process

Auditing (Process, Marketing, Financial), Technology Improvement (Energy Efficiency, Productivity, Waste Management, Byproducts), HR Capacity Building, Market Repositioning, Customer Relationship Management, IT Systems

4 For increasing sales Marketing, Branding, Distribution, Advertising, Sales Force Management & Training

5 For market expansion, local or exports markets

Marketing/Branding, Distribution, Packaging, Product Development, Pre/Post Sale Services (in addition to Core Product/Service), Certification/Standardization/Accreditation, Business Planning, International Marketing, 6 For product development Marketing Research, Technology Services, Product Design, Packaging, Business Planning

For a new business or diversification/expansion in existing business

Marketing Research, Technology Services, Product Design, Packaging, Business Planning, Legal Services

8 For increasing access to finance

Accounting Services, Business Match Making, Business Plan Development, Non-banking Financial Advances, Financial Planning, Credit Management Intermediaries, Venture Capital, Matching Grants

2.6 0.7 0.0 0.1

69.5

0.2 3.0 0.8

23.2

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Our understanding on the services needs of SMEs was further developed by the latest research carried out by Firms Project involving focus groups and interviews with over 100 SMEs. The primary areas of SME needs, which became apparent through the research, were identified as:

• Marketing & Sales Management

• General Management Support

• Technical Support

• Business Start Up Support

• Access to Business Information

• Access to Finance

The research covers each of these key SME needs in some detail to understand the ‘real’ needs and constraints SMEs face under each of the broader categories above. The research besides validating the above stated service needs also goes a step further to understand the underlying / real needs of SMEs.

Kindly refer to SMEDA’s Organizational Development Strategy report - section 3.2 for more information on underlying / real needs of SMEs.

4) Are there different BDSP for start up (SMEs) and existing SMEs?

Existing SMEs seek functional or technical consultancy services, customized to address specific business problems restricting their growth, or expanded guidance on how to evaluate and exploit growth opportunities.

Startups often seek advisory services on issues like how to raise seed money, support in refining a business idea, information on best sources for raw material, advice on company registration, business plan development etc.

5) What are major gaps in having functional BDSPs for providing businesses support to the start up small and medium sized businesses? How to go about it?

The gaps are caused by both demand and supply side challenges, resulting in a poorly performing BDS sector in the country. On the demand side, following are the key gaps / issues resulting in low performing sector:

• SMEs find it hard to assess the value of BDS, as it is intangible. Hence the demand for BDS remain low among the SMEs

• Lack of access to finances / affordability hinders BDS consumption among startups and SMEs

• SMEs find it difficult to articulate their needs into specific avenues of BDS interventions

• In the absence of a reliable database, visible BDS networks and forums, SMEs are not aware of

BDS being offered.

• Linkages of SMEs to BDS remain limited as there are only few providers in the market and they too are small sized organizations or individuals with limited outreach. SMEs on the other hand are scattered all across the country.

• Matching quality BDS providers to particular requirements of SMEs remains a challenge in absence of formal information channels. Personal references and word of mouth are generally the only ways to identify a provider.

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• SMEs do not have uniformly expressed needs for growth. It is difficult to create a perfect target market profile, but young, educated, innovators or early adopters can be identified as more likely customers of BDS.

• Export businesses frequently demanded BDS, as expectations of foreign buyers are difficult for them to meet on their own.

• Overall growth in the economy, industry situation, political environment, security and other such factors influence SME sentiments and have immediate impact on their willingness to invest in business development and consequently demand for BDS.

• Ability of BDS sector to demonstrate value to SMEs can help increase service demand.

• There is a general distrust associated with the term “consultants” due to unmatched expectation of

SMEs in their prior engagements with the poor quality consultants. The poor quality BDS providers are most commonly referred to as “briefcase consultants”.

• Certification of BDS providers and other such tools of quality assurance can help boost demand.

• SMEs’ fear of BDS providers passing sensitive information to regulators or to competitors also serves as a hindrance in purchase decision.

• SMEs have a misperception that BDS are expensive and only large companies can afford them.

The supply-side gaps are as follows:

• Supply for BDS remains low because of the dormant demand situation

• Very few good quality BDSPs available to deliver customized / need responsive services

• BDS providers have not been able to organize themselves as a business sector. They do not have an association to represent the sector, articulate their problems and try to address common issues.

• Small scale BDS providers, mostly small firms and individual consultants, catering to the needs of SMEs do not have resources to improve outreach, i.e., reach to potential SME clients is limited.

• Most BDS providers being small firms, face teething problems, due to the lack of sophisticated service delivery mechanisms.

• Lack of development in the BDS sector as a whole appears as a major entry barrier, discouraging new professionals to enter the market.

• Poor credit culture and issue of non-payment by SMEs is an additional challenge faced by BDS providers.

• BDS market was distorted by direct provision of services by public organizations and some donor funded initiatives.

• BDS providers quite often use peers / subcontractors to package a range of services to meet SME’s requirements. A more structured BDS sector can improve their capacity to network.

• A large part of BDS income comes from providing services to donors or SMEs using donor funds. However, the quality and consistency of donor funded service varies a lot.

There were several recommendations given in the Rapid Assessment Report (2009). Summary of which are as follows:

• Demand based relationship should be developed between the provider(s) and the SME, based upon the real needs

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• Governments and donor agencies should act strictly as facilitators.

• Financial and other direct assistance offered by donors should be intended to kick-start the market and must lead to sustainable and commercially viable BDS sector

• In order to make outreach of services more efficient and extensive, specific subsector approaches should be given preference

• BDS provision by local / regional providers and facilitators should be given preference as they are the closest to SMEs both geographically, socially and understand their problems on a first hand day-to-day basis.

• Capacity building of private BDSPs will help improve quality of services

• An effective and client-oriented BDS strategy requires mechanism for constant evaluation and performance measurement

• A database of BDSPs based on real service needs of SMEs should be developed and easy access to SMEs should be ensured

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