What financial challenges will SMEs face in 2023?

The following year will be challenging for small and medium-sized enterprises (SMEs), due to socioeconomic conditions such as inflation and fear of a possible recession, and although this year they have shown greater stability and recovery, glimpse challengesabout financial.

“The situation that is coming for SMEs will neither be favorable nor unfavorable, it will be something more challenging and new, especially since the pandemic is emerging and there are many behaviors that have changed. You have to understand how our business models will work from here on out,” said Alejandro Villalobos, CEO of Cumplo México, in an interview.

Regarding the business model, he explained that it must be adapt to new needs and consolidate the business, both in the offer and in what is expected to grow, something that will be favorable because the following year is looming more stability but moderation at the same time.

On the one hand, SMEs will have a positive outlook because the country is facing an important opportunity for growth, due to its geographical condition and the Free Trade Agreement. On the other hand, the international relations between countries like the United States and China, which are disintegrating, invite many nations to look for new places to carry out their companies, being Mexico one of the favorites.

Uncertainty about inflation and interest rates also prevails. Although the pandemic made SMEs see the importance of planning, having optimal financial statements and liquidity, many still do not manage the area correctly or in their search to grow, they do not adapt to what reality allows them. The key to dealing with it is to be a camel company.

Be a camel, not a unicorn

In order for an SME to survive and continue to grow in the market, it requires liquidity; however, 8% lack itaccording to Fundary data, which meant lower productivity and in some cases, higher-than-expected indebtedness when looking for financing options.

Now the liquidity of SMEs has shown recovery, but a drawback prevails: they continue to think about continuing to grow, taking unicorns as an example, those companies with a value of 1,000 million dollars or more worldwide, when businesses must think about be camels

“A few years ago there was talk of unicorns, but now the concept of camels is being addressed more because to begin with, they exist, they are real and their main characteristic is that they bring water in their humps, with which they manage to overcome periods of uncertainty. There it becomes important to have liquidity at hand to face any situation and like camels, have it in reserve for weeks or months of doubt”, indicated Villalobos.

For this reason, the first thing that SMEs should keep in mind is their goal of growth and consolidation, which does not mean being a large corporation and having accelerated growth, but rather having a stable and measured increase.

“Nothing guarantees success in a business, growth and good results will be the consequence of a solid model.”

management problem

Another problem faced by SMEs is the Financial management, since only 50% of the companies in the country carry out adequate financial planning, according to the National Banking and Securities Commission. In addition, many times SMEs confuse management and planning with making budgets or they do not have an accountant to take care of that part. Usually the entrepreneur is dedicated to it.

“Entrepreneurs tend to think that accounting is not as important as sales, but if they don’t have it, when they want to grow it will be more difficult, or they won’t be able to. With good management they will know where to invest, what decisions to make and the information will be in order”.

The lack of liquidity is the main cause of business failure Mexicans with 35%, followed by mismanagement of the business with 29% that is widely related to the financial part, indicates the Radiography of Entrepreneurship in Mexico 2021, prepared by the Association of Entrepreneurs of Mexico.

“Entrepreneurs don’t have to know everything, they don’t have to be superheroes, if there’s something they don’t know, they have to look for people specialized in it,” Villalobos concluded.