SME growth success formula

Today, besides the fact that the world is getting smaller, the external environment for Western and Central European companies is characterized by high energy costs, a shortage of available employees and (too) low growth.

Countering the high energy costs is anything but obvious and best served by a long-term comprehensive energy plan, including investments (to make your operations more energy efficient and to produce more green electricity) and a short term further focus on energy efficiency.

To help alleviate the shortage of deployable employees, we believe companies could offer a wider choice to cooperate. Why not as a start systematically offer the choice between employee and self-employed.

The ways to attract and cooperate with human capital have not evolved at the same pace as the expectations of the human capital. Hence, the ongoing growth of the number of self-employed workers and freelancers, i.e. people giving up the employee contractual status. And this trend is here to stay as f.i. less than one per cent of this group wants to return to the employee status, a much lower figure compared to the percentage of employees that aspire self-employment.

Whether the reasons are to be found in young people being (more) entrepreneurial, looking for freedom with regards to work options or whether experienced people do not want to take the risk of being thanked as an employee at an age were their employability is tougher, does not matter as such. Companies that want to attract top talent could offer cooperation solutions other than a contract between employer and employee.

But this spark is about growth and more specifically international growth.

Before the covid-19 pandemic, only 1 in 11 companies grew in a sustainable way and only 9 per cent came out stronger.

Although internationalization is by no means the only growth option and, depending on the context, other growth options can be more lucrative (see our eBook 'Revenue Growth'), the recipe for success of many European SMEs includes internationalization.

SME growth success formula: focus on a niche + focus on innovation + build strong customer relationships + internationalize

This formula even led for some SMEs to market leadership in the niche.

To successfully implement this formula, it requires:

• courage to focus. One cannot be at the same time an Olympic champion on the 100m sprint and the marathon. Being the best, implicates 'choice'. But for companies, focus means reducing the overall market. Therefore, internationalization (different from globalization) is necessary as this expands the niche market. The best niches are those that larger companies ignore (because of a too small size) and which require complex solutions
• financial capacity. Until further notice, money is still cheap and available, i.e. in the coming 10 years $ 36.000 billion will flow from the baby-boomer generation to millennial kids in the US)
• the following competences and processes: innovation, entrepreneurship and business development, preferably in a cross-pollination mix. In our view, innovation and entrepreneurship are anyway core competences in most SMEs, but a company-specific growth recipe and/or business development competencies (and the process) are more rare to come across.

More on business development competences and the process can be found in the growth spark 'Business development, say again'.

And as far as 'the world is getting smaller' in the first sentence of this post is concerned, there is no doubt that where 1990-2010 was the era of globalization, since then globalization is under pressure. On the one hand, we live the consequences of the US-China trade war (which worsened since D. Trump presidency and his 'make America great again' campaign); Brexit ('take back control' campaign); the ongoing energy transition (putting a.o. a barrier on transport); the covid pandemic (and the impact on a.o. production and supply lines from China to the West); the war in Ukraine (with a.o. economic sanctions and impact on energy and raw material supply and costs). Still, we do not believe that ‘produce, buy and sell local’ should be restricted by country borders and is definitely not an option for SMEs operating in a niche and/or which are located in a country with a small market size. Hence our slogan: 'goodbye globalization, long live internationalization'.