It was the dawn of the digital, content marketing and segmentation era some 15 years ago, when I first heard the acronym ‘SME’.

A chief marketing officer from a large corporate loomed over us agency-land folk and boomed in a Texan twang: “What are we doing about the SMEEEEEEE?” Somewhere in among his frantic gesticulating, we deciphered that this SME was the largest business market segment and we best get a strategy together, pronto!

We scurried back to our office and opened the WorldWideWeb (yes, we still called it that) and searched for SME. Finally someone worked it out – small to medium enterprises. A segment of the business world that had its own – though very broad – set of defining characteristics, which very much set it apart from corporate and institutional business clients.

And boy did we create a strategy, going on to build the coffers of many corporates (banks, insurance companies etc) by showing them ways to connect more meaningfully with SMEs. After all, there were many SME fish to be caught. We are a nation of small businesses with SMEs representing 90% plus of the two million plus businesses in Australia, ranging from the micropreneur (solo operators) through to very large businesses with turnovers up to $100 million.

The ‘SME spirit’ may indeed describe your organisation – one of the 80-90% of charities that make up the majority of charities in this country. And you no doubt have qualities and characteristics that set you apart from the ‘corporate charities’ – the 10-20% that seem to land most of the corporate partnerships!

So we come to this series of articles on ‘SMEs as Business Partners’ to help you carve out your own niche in this area. Why do we care? This is a segment not to be overlooked or dismissed, and I suspect it will be the fastest growth area in business-community partnerships in the years to come.

In the next two editions, we’ll be presenting a few standout SME businesses and how they are engaging with charities, and then we will wrap it all up with suggested strategies and ideas for your charity.

HOW MUCH DID YOU SAY?

When I read the headline and highlights from the Giving Australia 2016: Business Giving and Volunteering research report last year, I had to do a double take.

You may recall the press coverage that SME businesses gave $8.5 billion of the $17.5 billion from the 2015/16 financial year, just shy of the $9 billion from their corporate counterparts. Are you kidding me? Why aren’t we talking about this?

At the time, I was consulting to one of Australia’s oldest family businesses, an SME in the Blue Mountains, and helping them recalibrate and expand their existing efforts, which became the much-talked about Scenic World Shared CSR program (there will be more on that in the next article of this series).

Back to the Blue Mountains…There we were doing exactly what the Giving Australia 2016 research was telling us. SMEs in Australia have what I call ‘The CSR Aspiration Factor’.
They don’t necessarily relate to the ‘corporate’ part of CSR, but they are seeing other large businesses and corporates here and abroad creating significant levels of social impact and innovation through partnerships, and they want a slice of the action.

They are equally influenced and excited by the ever-growing social impact movement, seeing initiatives such as B Corp Certification and Pledge 1% as ways for them to connect and learn.

And thirdly, because SMEs employ most Australians and we are seeing employees push and drive the social responsibility agenda, SMEs are fast becoming adept at creating a strategy and evolving from a previous paradigm where they were almost forced to take a more passive, reactive position. Take a look at Graph 1 (below), which shows the percentage of SMEs giving by employee size, to understand the prevalence among SME businesses.

If the SME monetary contribution (nearly half of the $17 billion!) hasn’t yet convinced you, then see if it this does. The Giving Australia 2016 report provides a breakdown of businesses by size and contribution. Large businesses in Australia (200 or more employees) make up 0.2% of the population and there’s 3,717 of them.

These are the large corporates that everyone is trying to court in charity partnership land. The next size down is medium business (20- 199 staff), which comprise 2% of the business population, and there’s about 50,000 of these. Then we move into small land (five-19 employees), which is 9% of the population, and there’s about 197,164 of them. Then you go micro (one-four) and solo operators with about 1.7 million businesses.

What’s the big deal in that? If you are fishing in the pond of 3,717 with thousands of other charities, how many fish are you going to catch?

And how sustainable is it to actually only have a handful of corporate partners anyway?

But if you were fishing in the pond with 50,000 fish or 197,000 fish, and you had a strategy that connected 10, 15, 20 or more of these to your cause, you’re now not only looking appealing to these SMEs, but you are possibly looking at more sustainable forms of both income and engagement.

THE ASPIRATION FACTOR

This CSR Aspiration Factor can be clearly seen in the Giving Australia 2016 research, which shows that the larger a business gets the more likely it is to be engaged in a partnership rather than a donation or sponsorship with a charity.

In our dissection of the research, we found that 20% of SMEs are indeed engaging in partnerships (see Graph 2). You might note on this graphic that sponsorship remains largely unchanged across business size.

In the Giving Australia 2016 research, there is a section on the drivers for corporates and SMEs, with the most common SME drivers being: “It is a good thing to do, irrespective of the returns for us” (62%); “It demonstrates commitment to our local community” (50%); “It demonstrates the personal and business values of the owner” (44%).

The commercial imperative doesn’t kick in until drivers four, five and six (which stands in contrast to the corporate drivers): “It is good for the reputation/image of the business” (29%)“; It is good publicity for our business” (19%); “Increased customer goodwill” (17%).

Business drivers is an article just of its own, but if you want to delve further, Giving Australia 2016 was also able to track the changes in corporate drivers over the past 10 years, which makes for interesting reading.

WHAT ARE SMES GETTING BEHIND?

Is your charity or cause reflected in this discovery? (See table SME Giving by Activity).

Culture and recreation is the largest cause area supported at $2.9 billion, compromising a hefty $671 million in partnerships and $1.1 billion in sponsorships. Health causes received the next largest portion of the purse with $962 million, with a large proportion coming through donations at $759 million. Social services received $1.1 billion with $295 million through partnerships.

It’s interesting to note that after culture and recreation, the percentage of partnership dollar in each cause area drops. Does this mean that SMEs didn’t want to partner in those areas, instead choosing donations or sponsorships? Or, is the charity sector yet to catch up to the SME market, think more creatively and provide different entry points to help more SMEs find partnership opportunities?

One of the standout opportunities with SMEs is that you are largely dealing with the owner or founder of the business, unlike a corporate where you are dealing with a department. Not to short change the incredible CSR managers in Australian corporations, but the owner- managed firm is unique, often with control and ownership starting and ending with one person. It brings a whole set of autonomy, entrepreneurialism, flexibility, legitimacy, openness and connection that is largely uncommon in corporate Australia. We will unpack more of this in upcoming editions.

For now, I can highly recommend that you download Giving Australia 2016: Business Giving and Volunteering. Then find a comfy chair and pour yourself a super-large cuppa. The report is 130 pages of pure gold, and there is plenty of content there for you to start understanding more about the CSR Aspiration Factor!

Giving Australia 2016 reports and fact sheets can be found in the research projects section of communitybusinesspartnership.gov.au.