Small and medium enterprises (SMEs) are businesses with up to 250 employees. They are an essential part of the economy, providing employment and contributing to economic growth. There are many types of SMEs, including sole traders, partnerships, limited companies, and co-operatives.
SMEs are large contributors to the UK economy. They makeup 99% of all businesses in the UK, employ about one-third of the workforce and contribute £1 trillion to GDP each year. Running an SME differs from running a large company in many ways. The business size means fewer resources are available, and it is often harder to find skilled staff. This guide outlines some challenges facing SMEs and provides advice on how to run an SME successfully.
Resources
SMEs often lack the resources available to larger companies, such as financial, human, and technological resources. This can make it difficult to respond quickly to changes in the business environment. A lack of resources can make developing new products and services harder. This can be especially problematic if the business has reached maturity and growth is slowing, or there are no new opportunities for expansion.
However, some SMEs can overcome these challenges by using their limited resources wisely. This can be done by focusing on the business’s core capabilities and using them as leverage points for growth. The advantage of this approach is that it allows a company to grow without having to invest in new skills or technologies.
Management and employees
Another critical aspect of successfully running an SME is ensuring that the business has a good management structure. This can include hiring experienced managers to oversee different departments and divisions or outsourcing some of these functions. Most SMEs will typically have flatter company org structures which can help when it comes to decision-making and communicating with employees. However, this can also make it harder for the business to scale up as the number of employees increases.
The level of commitment from the owners and senior management can also play a big role in how well an SME performs. The best way to ensure that this is in place is to hire people who are passionate about what they do and who will treat the business as if it were their own. This will help ensure that employees care about their work and are committed to providing customers with excellent service.
Marketing and business plans
Carefully thought-out marketing and business plans are the backbones of any successful organization, but these are even more important for SMEs. A business plan should be written before you start a new venture and should include everything from your company’s mission statement to its financial projections for the next five years. A marketing plan will help you pinpoint areas where your business needs improvement, and it can also help you determine how much money you need to spend on advertising in order to reach your customers.
Businesses can sometimes deviate from these plans and lose sight of their original purpose, but without a written plan, you may find yourself running in circles. That’s why it’s also important to keep your business plans up-to-date. You should review it once a year and make any necessary changes. If you have a new partner or investor, they will probably want to see the latest version of your plan. The more active your business is, the more frequently you should review its goals and objectives.
Prioritizing profits
Lastly, a business is only as successful as its bottom line. Profitability is the ultimate measure of success, and you should make it a priority. A business owner must be able to accurately measure revenue and expenses, calculate profits, and identify areas where your company is spending money without generating returns. You should also set goals for improving your profits, such as increasing sales or reducing expenses. Once you know how much money you’re making, it can be easier to decide whether your company is profitable.
Managing debt is another critical aspect SMEs need to consider in order to improve profitability. When your business’s debt greatly outweighs your assets, it may be time to consider restructuring or auctioning off your assets. Suppose you have assets or investments that are not generating enough money. In that case, professionals at companies like MS Webb can help by getting good prices for your assets—and perhaps even finding new uses for them. They can also provide advice on where to get the best deals on assets and investments.
Final Thoughts
Small and medium enterprises are critical to economic development and play a significant role in job creation. They are also a prime target for fraud and financial crime. The challenges of managing SMEs are numerous—but so is the potential for success! By taking advantage of the latest technology, understanding and controlling risk, and working with experienced professionals who understand your business needs, you can be sure that your SME is successful.
