Small and medium-sized businesses are the backbone of the world’s economy, and Canada is no different. The larger corporations are only ever interested in serving the rich and the stock market. It is small and medium-sized businesses that actually employ people and recycle cash flow. As such, it is a priority to keep the SME sector healthy and growing.
This article will discuss growth in the SME sector, including challenges and opportunities to overcome them.
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The number of employees is the major defining factor of a business on the SME scale. Small businesses have less than 100 employees, and medium businesses have between 100 and 499. Anything beyond that is a large business.
By this definition, almost all start-ups are small businesses, and a few are medium businesses. It is exceedingly rare for a start-up to launch with 500 or more employees. The point here is that the growth of SMEs is also the growth of entrepreneurship and the economy in general.
Opportunities for Growth
The Canadian government has put in place many incentives to encourage the growth of small and medium businesses. Having the knowledge is an important thing to take advantage of. There are tax incentives, such as the Scientific Research and Experimental Development tax credit. Emergex SR&ED Consultants can help businesses apply for and obtain this government rebate.
There are many other government initiatives aimed at reducing the financial barriers to entrepreneurship. Such programs enable businesses to invest in expansion, state-of-the-art equipment, and better technology. The goal is to facilitate access to affordable financing options to help businesses grow, contributing to a better economy.
The Obstacles to Growth Among SMEs
Despite being the backbone of the Canadian economy, SMEs often encounter various obstacles that impede their expansion. These obstacles cause supply chain problems, make it harder to hire new employees, and force SMEs to increase prices. The obstacles in question are numerous, but four in particular have the highest levels of impact on growth. They are:
Limited Access to Capital
Many small businesses struggle to secure funding for expansion, restocking, and other day-to-day operations. Business owners are turning to alternative financing options to address this capital issue. These options include tactics such as crowdfunding and peer-to-peer lending. As has been mentioned, government programs have also been established to help SMEs gain access to a broader pool of potential investors. Taking advantage of these enables them to secure the capital needed for growth.
Rising Inflation, Interest Rates, and Debt
Small businesses are more likely to expect a decrease in profitability because inflation is literally eating away at profit margins. Many SMEs already have small profit margins to begin with, and the only recourse in the face of rising operating costs is to raise prices. Larger businesses can keep prices lower because they have diverse portfolios and, thus, more leeway. They are, therefore, more attractive to their customer base. There are other ways SMEs can tackle the effects of inflation, such as by focusing on efficiency in order to reduce costs.
Lack of Software Capability
Another significant impediment is the struggle to adopt and integrate advanced technologies. Many SMEs face a digital divide, lacking the resources and expertise to embrace cutting-edge technologies. This is especially serious because software tools are designed to enhance productivity and efficiency. No business can stay relevant today without some form of online presence where customers can browse and make purchases virtually. Even restaurants and supermarkets, traditionally in-person businesses, have switched to online catalogs and home delivery. This is because that is what customers want, and serving the whims of the customer is the whole point of business.
What SMEs Can Do to Accelerate Growth
It is not enough for SMEs to merely stay afloat in the competitive business space; they must grow and thrive. Collaboration and networking are essential business practices for accelerated growth. Building strategic partnerships opens up access to new markets and opportunities.
Business practices that involve upskilling the workforce and fostering a culture of innovation are also important. Business owners need to learn strategies for self-improvement, like investing in employee training and promoting a technology-friendly environment.
The growth of SMEs is a swiftly moving phenomenon. Despite the challenges faced, SMEs are expanding, applying for patents, and employing people. By leveraging government incentives and fostering a supportive ecosystem, SMEs can continue to thrive.