Seven lessons from the services sector you need to hear9 September 2017 Category:
UAE Company Setup
The UAE landscape is looking fertile for small and medium-sized businesses.
In fact, some estimates put the total number of SMEs in the UAE at 350,000. Add to that the fact that the services sector in 2014 accounted for 37% of Dubai’s total GDP and it’s clear there are lessons here for any entrepreneur looking to set up in the UAE.
So which are the leading service industries in the UAE, and what can future business owners learn from existing SMEs operating in them?
Success (and struggle) across the UAE’s services sector
From financing opportunities to relaxations in the law, particularly regarding bankruptcies, the government recognises the importance of SMEs in services and is taking action to encourage and support their growth.
But let’s pause for a moment.
Because with an SME failure rate of 30% – 40%, entrepreneurs are well advised to look to established businesses for lessons on both what to do, and what not to do. So let’s jump into seven examples to consider, before setting up your SME in the UAE’s services sector.
With an SME failure rate of 30% – 40%, entrepreneurs are well advised to look to established businesses for lessons on both what to do, and what not to do.
1. Public Relations: Four Communications, a PR agency, was established in 2001, opening in Abu Dhabi in 2007. Its managing director, Ray Eglington, explained to SME Advisor magazine that ‘one of the major challenges was the experience of learning how to operate in a completely new market environment.’ That was 10 years ago, so what would it look like today? Well, the lesson here is that much has changed in the region since 2007, with company formation specialists now available to help guide the entrepreneur through all the stages of setup, from location to legal compliance and business planning. In short: talk to an expert.
2. Sporting events: Sally Corander launched Interact Events, a sports events company, in 2014 with a licence from Meydan Freezone. She established that traditional finance wasn’t viable, opting instead for self-finance from savings. Corander noted how it has become a common complaint – banks not sufficiently supporting SMEs. Her takeaway is that time can easily be wasted chasing unrealistic opportunities, rather than focusing on those most likely to bring results. (Yet, by 2016 she had been approached by two groups wanting to buy in.) In short: understand when you’re following something likely to yield results, and when you’re chasing your tail.
3. IT: Celebrating 10 years in business in the UAE, Whitehats is a leading IT Service provider. It has continued to evolve through constant innovation in its service and product offering, a timely reminder that entrepreneurs must adapt their business to the local market and not simply cut and paste a business model from somewhere else. ‘Although we have faced ever-increasing competition in the market,’ says General Manager Rizwan Sabir, ‘…we kept growing more and more every day’. Sabir puts this success down to the ‘huge efforts of our passionate employees who always strived for excellence, quality and to perform to best of their abilities.’ In short: understand your local market, and take great care with recruiting.
4. Fitness: Michael Haddin moved to Abu Dhabi bringing his own brand, Haddins Fitness, from Australia. From the moment he set up in Zayed Sports City in 2010, he was determined to do things differently to back in his home country. ‘The whole mission of what I was trying to do is to create more fun and structured physical activities run by people that love what they’re doing.’ Now running a multi-million dirham enterprise with a second facility in Masdar City, Haddin is disarmingly candid about his strengths: ‘I think I’m a horrible businessman. I’m very good at what I do in fitness and it’s different than what I did back in Australia. This time I’ve hired people who are good at the business side of things.’ In short: Fitness is big business in the UAE, with more than 130 training clubs and centres in Dubai alone. New REP registrations (the now-mandatory registration for personal trainers with the Register for Exercise Professionals UAE), suggest the market is growing and the region’s exercise boom is driving it – in 2015, 1,400 fitness professionals were registered, and by 2016, that number had jumped to 2,000.
In 2015, 1,400 fitness professionals were registered, and by 2016, that number had jumped to 2,000.
5. Advertising: Mohammed Johmani set up O2, an advertising and branding agency, in 2005 on mainland Dubai and has since grown to 20 employees. O2 understands the importance of brand awareness and brand stories, and recently hosted a talk at in5, an enabling platform for entrepreneurs and startups. ‘As part of our ongoing CSR activities,’ said Johmani, ‘we believe it is very important to share our knowledge with the next generation of local startups and support new entrepreneurship in Dubai.’ In short: don’t keep your experiences to yourself, the more you share the more you will get back.
6. Accountancy: Dubai-based accountancy firm The Accounts Department specialises in bookkeeping, auditing and remote CFO services. It was one of eight finalists in the Small Business of the Year category at the Gulf Capital SME awards, 2016. Now with five staff, it’s well placed to guide SMEs through the new VAT legislation coming into effect on Jan 1st 2018, and is a shining example of how SMEs in the sector can thrive in a market where SMEs and startups can’t afford the services of the ‘big four’.
7. Management consultancy: Metis Consultancy was established in 2014 by Nayef Shahin to create customised solutions for SMEs, specialising in strategy and turnaround. Its growing list of clients isn’t the only testament to its expertise in the SME ecosystem: it was appointed this year by the Mohammed Bin Rashid Fund (MBRF) to provide monitoring to SME projects financed by the fund. ‘Metis will be working closely with the SMEs/entrepreneurs and will be able to provide advice and support where needed,’ Shahin says. ’We believe in the potential for growth of these companies, however, entrepreneurs or SMEs sometimes lack the tools and the skills necessary to make informed decisions. Big corporations can afford to hire a full-fledged finance team, strategy team and marketing teams but SMEs can’t do that.’ In short: find a niche where the big companies cannot go.
In short, find a niche where the big companies cannot go.
Lessons from the past – and your future business
‘The UAE cements its position as the startup hub of the region with the largest number of startups, funding and transactions in 2016.’ That is according to Philip Bahoshy, founder of Magnitt, a website that connects entrepreneurs and investors directly. The UAE’s regional dominance extends to startup funding as well: around 54% of startup funding for the whole of the Middle East and North Africa (MENA) region comes from businesses in the UAE.
Contributing to that flourishing ecosystem, Dubai SME, part of the Department of Economic Development (DED) of Dubai, acknowledges that SMEs represent 95% of all companies, accounting for 40% of Dubai’s GDP, ‘and play an integral role in fostering innovation and entrepreneurship.’ And under the Dubai Plan 2021 they aim to increase that to 45% in the next four years.
The UAE is a ‘success-breeds-success’ ecosystem, so it’s down to entrepreneurs themselves to look at the past in order to understand their business future. And SME activity in the services sector is certainly one great resource, and marker, when it comes to understanding the UAE landscape.
Ready to take the leap?