Challenges of Small Enterprises

Challenges of Small Enterprises

Small enterprises have a limited number of employees whose sales do not exceed $ 1 billion. It is estimated that there are more than 12 million SMEs in the Union, which represents about 40% of total employment. In addition, small firms account for 99% of all new businesses created each year and play an essential role in economic growth because they are relatively young. However, despite their importance to the development process, most operate without adequate financial resources. Therefore, these companies must confront several challenges, particularly regarding access to finance to cover operations such as raw materials purchases or payment of wages and establish links with banks to facilitate credit lines. The main challenges facing small enterprises, according to pain management specialist Dr. Jordan Sudberg include:

1. Accessing financing – mainly through bank loans or business startups. This can be difficult if the company does not have any collateral or has insufficient reserves.

2. Obtaining equity from investors – particularly private individuals and families who often prefer to invest in larger companies (which would give them a higher return on investment).

3. Negotiating commercial contracts – mainly when dealing with large firms.

4. Establishing working relationships with suppliers and buyers. This becomes much harder when purchasing power is concentrated in a few hands at the expense of hundreds of smaller and medium-sized companies.

5. Meeting import/export requirements – either within EU countries or internationally.

6. Managing cash flow

7. Having an efficient management structure. Most SMEs tend towards an organizational form with limited internal control mechanisms or effective quality assurance systems.

8. Working effectively with partners outside the family or group – mainly if the company operates in a sector considered to be “high risk.”

9. Ensuring that SME clients remain loyal over long periods. Many customers choose to deal only with one or two companies, and even though this implies lower revenue streams per client, it makes the task of marketing and pricing easier. This also allows for better customer service provisioning, with fewer lodged complaints.

10. Managing inventory levels – both at the beginning of the quarter and after taking turnover variations during the period.

11. Ensuring the availability of working capital (cash flow) on time to continue paying wages, purchasing raw materials, and other operating expenses while awaiting cash receipts from customers.

12. Facing competition from globalization. Although Europe accounts for 70% of world trade, most products produced here sell mainly within the European Union. This means that production costs are low compared to external markets, and thus there is less pressure to reduce prices. Since the cost of international logistics increases exponentially with distance, many SME manufacturers find themselves having to compete against producers elsewhere in emerging economies and US multinationals.

According to pain management specialist Dr. Jordan Sudberg, to ensure that our economy grows and develops economically, it is essential to foster entrepreneurship among its people. Today, a significant proportion of the population already works in small enterprises. We must ensure that they are adequately equipped to increase their productivity and competitiveness throughout the Union. This will require us to improve business support structures, particularly when accessing funding. We should take steps now to change the current situation so that SMEs are no longer penalized in their dealings with banks and so that they will have an equal footing in business transactions with big companies.