Lars Holdgaard
Lars Holdgaard
Challenges for SMEs

Challenges for SMEs

SMEs are the abbreviation for small and medium-sized enterprises. To be able to categorize your business like this, you need to fall under the EU definition of an SME.

Small businesses have less than 50 full-time employees, while medium-sized companies have less than 250. In addition, the turnover for small businesses must be a maximum of € 10,000,000 annually, while the medium-sized companies must be € 50,000,000.

As many as 99% of all companies in the EU are described as SMEs and are therefore a key part of Denmark’s and Europe’s growth.

However, there are some challenges for SMEs that I will highlight in this article where I will also address them.

  1. Dependence on few customers

Many SMEs rely on one or more customers for their business to run around. This means that if one of these customers terminates the collaboration, it will have major consequences for the company, which loses a lot of money on it. A good idea would be to expand their customer base or see if something can be changed in their payment flow or agreements - in this way they protect their few customers and give them the best possible cooperation. This gives the SMEs a wider safety net, as they will no longer be dependent on a few customers.

  1. Unforeseen changes and expenses

If the SME has some unforeseen expenses, it can have very negative consequences for their cash flow. Therefore, it is important to have a plan of what they do when such situations arise.

The unforeseen expenses can be, among other things if:

  • The SME loses an important customer
  • A customer goes bankrupt
  • There come some economic conditions which make the market unpredictable

This can be solved by creating a separate account where something is set aside each month so that you and the SME are always prepared for unpredictable expenses and changes.

  1. Too low sales and low revenue

 It is alpha-omega for a positive cash flow that your SME customer reaches the goals set for revenue and sales. Therefore, it is important to look at the sales strategy to ensure that there are no risks there.

You can help the SME by making a forecast. To make it as accurate and realistic as possible, you must have access to SME sales results over time. Then you can set some realistic sales goals for the SME, and here it is important that they them themselves must understand what is realistic concerning their goals.

You can also help by looking at SMEs ’marketing strategies. Make sure they reach the right audience and use social and digital media to market them.