Small- and medium-sized enterprises (SMEs) are the unsung heroes of the economy, accounting for almost 90% of all entities populating the business landscape and generating more than 40% of the national GDP in emerging economies. But everyone knows that most small businesses don’t plan to stay small forever. Many of them harbour bigger ambitions and have their sights set much higher as they look to embrace innovation and expand their operations.
Unfortunately, even though SMEs hold a lot of power collectively, they are not as strong individually, being faced with numerous challenges that often hinder their progress, and resource scarcity represents the biggest obstacle standing in the way of achieving their developmental goals. Unlike their larger counterparts, SMEs don’t stand on limitless funds that could facilitate their evolution. However, smaller businesses do have several aces up their sleeve that they can use to their benefit and various solutions at their disposal to further their growth objectives and fast-track advancement.
The fundamentals
For daring SMEs that have their eyes set on the future, using their unique advantages and getting the basics in check is key to ensuring sustainable growth. First of all, SMEs have to get the timing right and know when to put their plans into motion as rushing things up or taking too long to take action could compromise the outcome.
It’s a well-known fact that SMEs are more agile than bigger enterprises and can therefore adapt more easily to changes. Entrepreneurs can leverage this enhanced flexibility to look for new opportunities to innovate, experiment with new ideas, test out different solutions, adopt new tech, take risks, and become a forward-thinking company.
Having a smaller customer base can also be a blessing in disguise for SMEs. This gives them the opportunity to connect with their clients on a deeper level and get to know their needs and desires better. Based on these insights, SMEs can develop products and services that meet customers’ changing demands.
Acknowledging the power of strategic partnerships is another aspect that can streamline the evolution of SMEs. Establishing and maintaining beneficial alliances with other businesses and professionals in their respective industries opens the door to numerous opportunities that can accelerate growth and innovation.
Most importantly, SMEs need to be ready to embrace creativity and foster a culture of innovation and continuous development. Cultivating a growth mindset is a prerequisite for building bigger teams, upgrading processes and operations, expanding internationally, launching new products/services, and whatever other goals SMEs might want to achieve.
Finding the funds
Having made sure that they are primed for progress, entrepreneurs can turn their attention to the most important point on their growth agenda: securing the necessary funds, which represents the crux of innovation and development for all SMEs. In the current economy, strained by issues such as rising geopolitical tensions and the cost-of-living crisis, SMEs are finding it increasingly difficult to obtain funding to back their ambitious endeavours. However, money-related challenges can be overcome and these solutions can help a lot in this respect.
Government grants
Aware of the role they play in sustaining economic growth, the government has put forward a series of initiatives meant to lend a helping hand to SMEs that want to embrace innovation and take the next step in their evolution but lack the resources to do so.
R&D Tax Credits represent one such scheme that rewards UK companies for investing in innovative projects and carrying out research and development activities that enable technological or scientific advances. In other words, if an SME is taking risks and spending money on creating innovative products, processes, and services in their field of work or improving existing ones, they might be eligible for claiming R&D tax relief. This cash injection can help them cover expenses for consumables, staff, licenses, and other costs involved in the process, encouraging SMEs to continue on their growth path.
Alternative lenders
In recent years, banks seem to either shun SMEs for not meeting their strict lending criteria or provide loans with high interest rates that discourage them from applying in the first place. Fortunately, banks are not the only source of financing that SMEs can turn to.
These days, companies have the possibility to explore a variety of alternative lending options that could be a better fit for their financial needs. These include:
- crowdfunding
- angel investors
- venture capital
- invoice factoring
- microloans
- P2P loans
- bridge loans
Each of these funding solutions comes with its own pros and cons, so it’s important for entrepreneurs to do their due diligence before selecting an option.
Comprehensive growth plans
Investors and alternative lenders might have less strict standards and fewer requirements than banks, but they’ll still want to make sure SMEs won’t squander their money and will be able to pay them back or use the funds sensibly to reach their objectives.
This stresses the importance of developing a comprehensive growth plan that SMEs can present to investors/lenders to convince them that their venture is viable and accepting their application is a wise decision. The plan should include detailed information about the company’s financial situation and the strategy they intend to follow, and provide realistic and accurate financial projections. Taking the time to prepare a compelling pitch can set SMEs up for success. Perseverance is just as important as rejections are a normal part of the financing process.
Closing thoughts
The road might not be easy for SMEs pursuing innovation and growth in the current economic climate. There are clearly numerous challenges that can stop businesses in their tracks and prevent them from moving forward. However, a lack of resources should not be regarded as an insurmountable obstacle. With the right mindset and an adequate approach, SMEs can get the funds they require to put their innovative ideas into practice and take their business to the next level.
