After 26 years with global consultancy giant PwC, 15 of which were in the Middle East, managing partner of AHR Corporate Advisory Services Steve Drake, and some business partners, decided to apply the experiences garnered there into launching their own firm focusing on owner-managed SMEs.
Established in November 2021, AHR Corporate Advisory Services (AHR CAS) is part of the wider AHR Group, which initially started as a private wealth business around six years ago. Until the corporate advisory services were launched by Drake and his partners, AHR was catering to individual clients.
“After 26 years, I retired from the partnership in 2021 for a number of reasons, not least of which was wanting to do something for myself outside of the corporate world,” said Drake.
In an exclusive interview with Arabian Business, Drake discusses the market gap that AHR CAS is addressing, the challenges for the UAE’s startups and small business as well as future opportunities.
What is the market need for such a business?
We also built a brand in the SME owner managed sector. The reason that myself and Steven Watson, my business partner wanted to do that was that our experience with the big firms was that their interests lay with large accounts, large corporates, large government related entities or large government transition type projects. And therefore the owner-managed businesses in the SME space was always neglected by the big firms because quite simply, they didn’t generate sufficient fees.
Therefore there was a sector of the economy, which is quite crucial to GDP, which was starved of the top advisory capability.
So we created this business to focus particularly on that market segment but with a bit of a difference. It was about bringing the team’s collective experience to the SME and the owner-managed market and delivering it so again, a different slant on our business from the big firms is the delivery of the work tends to be by the junior staff – the partners will hold relationship and have the nice conversations but the delivery of the work tends to be by junior people. What we wanted to do with our business is have senior people deliver the value to our clients.
From your experience, what are the most common challenges faced by owner-managed SMEs and startups in the region?
Issues or challenges within the sector kind of fall into two separate buckets; I describe them as demand driven. Where clients will come to you with specific issues, or supply driven, and that means we will have conversations with clients around issues they don’t know that they have.
Sometimes, the old adage of ‘you don’t know what you don’t know’, is very true meaning some clients don’t know they have issues in some areas. In demand-driven side, we are seeing three broad challenge categories at the moment, and I would say the first one is scaling or growing the business and understanding how to do that. That could be the cut from concept and startup through to a relatively mature business that has reached a bit of a plateau and they’re not quite sure how to take it forward from that plateau.
Coupled with that, and directly linked to growth, is financing of that. Getting finance, particularly bank finance in the Middle East for SMEs is a challenge because often the banks see SMEs as quite a risky sector. Also, banks like to collateralise their lending, and quite often SMEs don’t have collateral to support the loan, and therefore the lending is unsecured.
Raising equity can be a challenge as well and part of the reason for that is the level of equity finance they look to raise is generally lower than at a big firm or a boutique, corporate finance advisory would entertain, and therefore they fall into a gap. There are investors that will invest, but being able to access that market is a challenge for them. Hence, this is an area we are looking to plug.
The final category is selling their business because they want to realise value. They’ve built it, they’ve scaled it and now they want to do something different or they want to retire and are looking to successfully exit and get the value that they’ve built in this business.
The other area is where clients don’t necessarily know they have issues, and through talking to them and understanding, we can help them identify issues.
For example, we are working with a client to scale their business but through doing that, we can see that their processes are very manual, and therefore they spend a lot of time and incur a lot of cost. Their processes can be automated quite simply, thereby streamlining processes and saving cost. They hold a lot of inventory and they have relatively weak supply chain management. So again, by analysing that and by putting some changes in place, we can streamline and optimise that.
What opportunities do you see for small businesses and startups in the UAE?
As a market, the UAE at the moment is very attractive for small businesses.
If you just look the macro dynamics of the UAE, we’ve had an environment that’s coped incredibly well with coronavirus, we’ve recently seen quite an influx of new businesses, people relocating from other parts of the world, and generally quite a vibrant economy which bounced back pretty well from the impact of the pandemic – and a big part of that is the expansion and the growth in the SME sector.
That comes in many areas: hospitality has rebounded, we have quite a good space in education and healthcare and increasingly more impressive technology-based companies, which could be startups or more advanced businesses with some of them being quite global – so they might be headquartered here but actually servicing other markets.
So I see quite a robust economy for the SME sector here. Therefore their growth potential, interest from investors overseas, and a much improved lending environment from what it has been as the past are all contributing factors to help drive and help grow that SME economy. What we’re trying to do is to help facilitate and improve these things and therefore support the economy and the startup environment.
When it comes to startups, where we help the most tends to be in the early-stage financing rounds, helping support companies access finance.
What do you see as the future of UAE-based SMEs and startups?
I see it continuing to grow. I think it’s supported by the country and its leadership but there needs to be further support, particularly around funding.
Whilst things are improving with banks, lending to the sector needs to get a lot better and the rates that are charged to the sector need to be much more competitive. But I also think that some of the other softer areas – such as the cost of living in Dubai is quite high, particularly when you look at the real estate market – and the increased demand of people coming into the country has significantly impacted the real estate market.
There are questions around affordability for startups and particularly the younger generation who maybe don’t have the capital behind them when they’re starting their businesses. That could be an impact on the rate of growth in that sector in the startup and SME sector. So I think there’s a positive environment, I think there’s support for the sector but there are still some challenges in making it a reality.
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