Challenges and Opportunities for SMEs in the Coming Years

The upcoming years, we will witness constant changes occurring in our society, which will bring forth challenges and opportunities for SMEs and businesses

In a world of constant progress and transformation, it is surprising to discover that only 18% of SMEs fear becoming obsolete. This attitude, characterized by facing concerns with eagerness, caution, and a desire for self-improvement, stimulates SMEs to view the challenges they encounter as genuine opportunities for growth.

Table: Key concerns for SMEs in the coming years

• • • • • • Inflation of prices
          • Business profitability
          • Ahorrar en la factura energética
          • Non-payment or delinquency
          • Lack of demand
          • Evolution sector
          • Viability of the company
          • Liquidity problems
          • Supply chain issues
          • Investment for growth
          • Access to financing problems
          • Lack of talent
          • Falta de talento
          • Cybersecurity issues
          • Funds support

Challenges and Opportunities for SMEs: Concerns for the Near Future

SMEs are fully aware of the inherent difficulties in business management today, especially in the current economic environment. In fact, inflation ranks as the main concern for these companies, with a staggering 47% of SMEs expressing their worry in this regard.

This concern, directly linked to the financial health of businesses, is closely followed by other equally relevant issues such as company profitability (38%), energy costs (34%), non-payment or delinquency (26%), and lack of demand (26%). Therefore, the most pressing concerns for SMEs revolve around factors that directly impact their expenses and income.

The rise in prices of products and services directly affects their ability to maintain profitability and competitiveness in the market. SMEs face the challenging task of balancing production and operational costs with generated income to ensure their survival and sustainable growth.

Another aspect that concerns SMEs is the profitability of the company. In a highly competitive market, businesses must constantly seek strategies to maximize profits and optimize financial performance. It is necessary to make sound decisions regarding resource management, technology investment, and improvement of internal processes, with the aim of guaranteeing adequate and stable profitability over time.

Energy costs also represent a significant concern for SMEs. The increase in fuel and general energy prices directly affects the cost structure of businesses, reducing their profit margin. To counteract this situation, SMEs must explore more efficient and sustainable energy alternatives, as well as implement measures to save and responsibly use energy.

Delinquency and unpaid invoices are other obstacles that SMEs must deal with. Delays or non-payment by customers seriously compromise the liquidity and payment capacity of companies, jeopardizing their continuity. It is crucial to establish an efficient collection management policy and have legal and financial mechanisms to minimize the risks associated with this problem.

Less prominent, although still considered by one in five domestic SMEs, are concerns related to company viability or liquidity issues. This may be partly due to the improved access to financing that companies currently have, as only 14% claim to have difficulties in this regard. Additionally, it is noteworthy how certain problems such as cybersecurity, talent shortage, or legislative changes, although still present, do not represent a significant constraint for the majority of these entrepreneurs, as revealed by the study.

The growth in size and revenue, mentioned by 42.5% of SMEs, and the control of rising costs, indicated by 40.6%, are the two major challenges facing these companies in 2023. Additionally, one in four SMEs considers that adapting to market and customer changes, as well as opening new lines of business, are also primary challenges they will have to confront in the coming months. Furthermore, one in five SMEs adds innovation, improving treasury management, and the search for both suitable suppliers and employees as key factors to consider.

However, just like concerns, challenges also vary according to size and sector. For smaller SMEs, the major challenges are growing in size and revenue, controlling cost increases while maintaining prices, and adapting to upcoming changes. On the other hand, regarding sectors, the construction and service sectors share the main challenge of controlling costs and prices. In contrast, SMEs in the agricultural sector show a greater concern for energy independence, while those in the industrial sector focus on adapting to change, developing sustainable strategies, and seeking reliable suppliers, as evidenced in the study.

 

Key areas for improvement for SMEs in the coming years

Now, what plans do entrepreneurs have to turn these challenges into opportunities? They are determined to focus on several areas of improvement within their companies. Enhancing marketing strategies (34.1%), establishing new business strategies (32.7%), gaining a better understanding of customer needs (30.4%), identifying previously overlooked business opportunities (28.2%), and leveraging available aids and subsidies for companies are their main objectives. Furthermore, larger SMEs also prioritize expanding into foreign trade and increasing investment in sustainable equipment as priority areas for improvement.

• Development of marketing strategies
• Implementation of new business strategies
• Understanding customer needs

Overall, improvement efforts are generally shared, albeit with slight variations across sectors. In the agricultural sector, companies demonstrate a strong intention to enhance investments in sustainable equipment and gain greater access to subsidies, an approach also shared by the construction sector. On the other hand, both the industrial and service sectors prioritize the search for new business strategies and the enhancement of their marketing strategies.

Despite the challenges and the magnitude of current obstacles, along with the growing awareness of the need for improvements to establish an efficient and profitable business model in the medium and long term, SMEs maintain a positive attitude. According to responses from entrepreneurs, 66% of SMEs have a high degree of confidence in the future (7 out of 10), while 28.2% express moderate confidence, and only 5% show little or no confidence.

References

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Notes

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