Boosting Sme Growth In Times Of Uncertainty
Adequate planning, perseverance, and the ability to be agile in decision-making are some of the basic elements for an SME to be able to promote its growth even in an uncertain situation.
The speed of today’s world means that, more and more, companies seem to live installed in permanent uncertainty. Increased inflation, limited access to raw materials, bureaucracy, dizzying rises in interest rates, disruptive changes driven by technology,… It seems difficult to think that an SME, with limited resources and focused on day-to-day challenges, day, you can establish objective planning to sustain your future growth, but the truth is that it is feasible to do so, as long as you have the necessary objectivity and discipline, and, also, the possibility of relying, if necessary, on external financing in the if it is necessary to do so.
Main actions to expand the business
The first question is possibly the most important: When is the right time to start an SME expansion strategy? Despite what you may think, the only real answer is that there is no magic recipe that serves to mark the right time to carry out this process. However, there are two pieces of evidence from the company itself that serves to support the start of this expansion process. On the one hand, having abundant liquidity for a stable and prolonged period. If that happens, it means that the company is generating a good volume of sales and income, while its short-term expenses are controlled. In this way, an economic surplus is being generated that invites us to think that it should be invested to increase the business.
The other marker is less objective but possibly even more reliable. This is the opinion that is collected from customers through surveys or after-sales service. If a high percentage of positive results is achieved, the most plausible conclusion is that user loyalty has been achieved and sufficient knowledge of the market in which the company operates has been achieved to think that it can be extrapolated to other segments. In addition, likely, satisfied customers will also translate into higher sales and the real possibility of increasing them significantly more if protocols are established for the cross-selling of products.
Steps to drive business growth
- Carry out an accounting audit that evaluates the real financial situation of the SME. The most advisable, whenever possible, is to entrust the process to an external and independent entity. The conclusions and recommendations of this work must be implemented in the company before going further.
- Prepare a growth plan as if it were a business plan. Using all the operational knowledge acquired by the company throughout its experience in the market, the state of the competitors will be evaluated, the competitive advantages provided by the entity, a study of the sector, and the geographical area to which it wants to extend the activities, an analysis of the strengths and weaknesses of the SME (SWOT), the real and potential allies that could be counted on, future market trends and different scenarios that could occur throughout the process and of what way to deal with them in each case.
- Draw up an investment and expense plan that takes into account the costs of all the elements that will influence the expansion process of the activity. That is to say, it is necessary to analyze economically the expense of personnel, in the acquisition of licenses and regulatory procedures, in the purchase of machinery and facilities with which to start the activity, in the marketing and commercial campaign that will require the disembarkation in a new market or in the tax costs of the new territory and how it will impact the accounting reality of the company.
- Study the financial resources that the company can count on in its expansion process, both its own (economic reserves and surpluses, the possible sale of products and licenses, capital increase among partners,…) and external ones, mainly from the field of banking (guarantees, lines of credit, loans, ICO lines,…). In this sense, it is also opportune to evaluate the public aid and subsidies that are available at that time, since they can suppose relevant economic aid.
- Analyze what is the optimal way to enter that new market. For example, you can acquire a local company or look for a consortium between different companies. It is also possible to form alliances with other firms for a specific project, as is the case with temporary joint ventures (UTEs).
- In addition, it is necessary to assess how digitization and online sales will influence landing in the new market since it is likely to have a direct influence on the possible economic reduction of the process as a whole.