How have SMEs behaved during the economic recovery?
July 5, 2021
7 minutes to read
Opinions expressed by Contractor the contributors are theirs.
After an extremely difficult year for small and medium enterprises (SMEs) due to the pandemic, the economic recovery is gradually reaching these companies. It is worth recalling the efforts that these companies have made to keep operating, which is not surprising, as they are fundamental to the national economy, since they generate 72% of the formal jobs in the country.
“Even if in 2021 some SMEs are starting to see favorable figures, getting here and keeping as many jobs as possible was not at all easy, since according to estimates from the National Institute of Statistics and geography (INEGI), 20.8% of these companies permanently closed their doors ”, Juana Ramírez, President of the Board of Directors of the Association of Entrepreneurs of Mexico (ASEM) shared with us.
However, the progress of the national vaccination plan, the implementation of preventive health measures and the gradual opening of activities create a less unfavorable scenario for SMEs which have managed to survive the harshest phase of confinement.
“It has not been easy for any company to overcome the pandemic, but SMEs in particular have had to make a series of important changes, ranging from investing in digitalization, training of all kinds, researching new forms funding or business model changes. All to continue to operate. Many entrepreneurs were not alone and relied on the Association of Entrepreneurs of Mexico (ASEM) to develop or acquire new knowledge that helped them survive and grow their businesses, ”says Jorge Corral, Executive Director of the ASEM.
According to ASEM data, based on a study carried out in March 2020, 87% of SMEs estimated that they would lose sales, customers and new work projects. And while it is still too early to assess the impact of the economic stimulus for these companies, the truth is that the outlook for growth is encouraging.
According to PwC survey of family businesses 2021 , 55% of these companies expect favorable economic growth for 2021; while 74% consider that their finances could improve until the following year.
Despite these prospects, it is clear that before the pandemic, SMEs were already facing major challenges. According to the 2020 ASEM Entrepreneurship X-ray, some of the main causes of failure for Mexican entrepreneurs include lack of market knowledge, mismanagement of business, lack of working capital, and problems obtaining funding. funding.
Indeed, ASEM reports that 90% of Mexican SMEs are financed from their own resources during the first three years of life and that 85% continue to do so in the following years.
“These and other reasons have led SMEs to become one of the sectors most vulnerable to market complexities during the pandemic. However, these companies are gradually taking advantage of new business opportunities and reversing their negative figures; that is, they don’t just focus on survival, but on growth, ”adds Jorge Corral.
Last May, INEGI conducted a study to assess the current situation of Mexican businesses and found that in April 2020, 93.2% reported some level of assignment, in May 2021 this figure fell to 85.5%.
Likewise, the confidence of SMEs in their growth is increasing and currently 57.8% say they are optimistic about the future of their business, mainly due to the fact that the contagion rate has decreased, government regulations allow greater openness and , above all, because digitization has played a crucial role in the sustainability of these companies.
Scan or Die
One of the most significant changes left by the pandemic in SMEs is greater adoption of digital tools to create more resilient and competitive businesses. According to information from Microsoft, in Mexico 83% of these companies consider that the adoption of new technologies has been the key to the reactivation of their business in the short and medium term.
In view of this, ASEM has continuously worked on creating and promoting programs that serve entrepreneurs to implement digital tools that help increase the positioning and sales of their businesses. One of them is the #FridayWhatsApp program, in which more than 12,000 entrepreneurs have been trained in the use of this tool. Its success has been such that it will spread to other countries of the world.
“Thinking about economic reactivation would not be possible without the support of digital tools such as free messaging platforms. These have the potential to help businesses communicate more effectively with their customers and reach a large number of users, and they are also easy to use, ”says Corral.
In Mexico, 83% of these companies consider the adoption of new technologies to be the key to the reactivation / Image: Depositphotos.com
What about funding?
Access to finance was very complex for SMEs during the first year of the pandemic. According to ASEM, at the end of the first quarter of last year, 31% of companies predicted that they would have difficulty paying loans or credits and 40% indicated that they might have financial problems to comply. to the payment of their taxes.
In addition to this, INEGI reports that the current situation of SMEs, although it has improved compared to the previous year, still presents significant challenges, as more than 8% had less access to financial services in Due to high interest rates, providers are less willing to extend credit because the risk of not being able to pay debts is very high.
What do entrepreneurs need?
The entrepreneurs consulted by ASEM underline that it is essential to support SMEs in this stage of economic recovery, among their main demands are:
- Friendly schemes for the payment of taxes and employers’ contributions of employees
- Encourage investments in high impact companies
- Simplify business management procedures and reduce the tax burden in the early years.
- Increase access to markets and funds for women entrepreneurs
- Encourage payment to suppliers within a maximum of 30 days, among other things.
Finally, Juana Ramirez commented:
“The pandemic has been a huge challenge for the world and to face it we recognize 3 major groups who have become undeniable heroes: healthcare professionals, women and entrepreneurs. The latter will be the leaders of economic reactivation through companies and their work teams, which will show us once again that entrepreneurs are capable of overcoming any obstacle inspired by their commitment to the economic and social development of Mexico ”.