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SMEs need to keep growing in order to survive

May 28, 2014

By Dror Orbach

Small and mid-sized enterprises (SMEs) play an important role in the US and Canadian economies – as well as those of many other countries worldwide. In Europe, according to the Economist Intelligence Unit, SMEs employ two-thirds of the workforce and create 85 percent of all new jobs. Despite this — or perhaps because of it — many SMEs constantly struggle with limited resources. On one hand, expanding carries considerable risk, but on the other hand, SMEs must typically prioritize growth rather than attempt to maintain a stable size in order to survive in today’s competitive market.

A 2013 report from the Economist Intelligence Unit, entitled “Scaling SMEs: Building a flexible platform for growth” explores how SMEs are scaling their organizations to provide resources for growth, while at the same time making sure they remain flexible enough to allow responsiveness to changes in market conditions. Obviously, they need to do this in a way that will not threaten the viability of their firms, which can be a tricky balance. The report also highlights the role of technology in scaling SMEs, and discusses the success factors in scaling headcount.

According to the report, which was based on in-depth interviews conducted with founders and managers of SMEs, the key to successful scaling of an organization begins with having a strong operational platform that can handle growth, while at the same time enabling management to rapidly respond to market conditions. This typically involves establishing new organizational structures, policies and procedures that enable repeatable and efficient operation while growing. Finance and human resources management are process areas that often require careful consideration in this regard. Planning for sufficient working capital and preserving the company culture through rapid growth periods are also crucial to success.

Fortunately, SMEs now have better access to IT tools and capabilities that help scale the business. The Economist Intelligence Unit report highlights the fact that enterprise resource planning (ERP) and various cloud-based business solutions “are now widely available on an as-needed basis, reducing capital requirements and costs, and providing scalability, flexibility and resilience.” One of the conclusions of the report is that as a result of these trends, “SMEs are gaining competitive advantage over larger enterprises.”

What about your company – what does its future look like? Most of us can’t predict the future – but are you implementing a growth strategy that can deliver and rely upon a scalable operational platform?

 

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