Mexico is a country of micro, small and medium enterprises (MSMEs). According to the National Institute of Statistics, Geography and Research (INEGI), they represent 99.8% of all businesses in the country and Due to their composition, they are more vulnerable to economic shocks, as the inflationcompared to large corporations.
In 2021 alone, just over a million economic units were born; however, of every 100 businesses that are born, 52 die before they are two years old. For this reason, the constant of SMEs is survivalthis added to the current panorama such as the increase in costs due to inflation in Mexico —which reached its highest level in 22 years in August 2022—.
In this case, the Radiography of Entrepreneurship, prepared by the Association of Entrepreneurs of Mexico (ASEM), details that 45% of the people who undertake have had a business that failed and the main reason is the lack of liquidity, followed by the lack of knowledge of the market. The previous context serves to be aware of the challenges that SMEs currently face, and the question that arises is what can they do to protect their finances today?
It is important to note that there is no manual or recipe that can be applied uniformly; Despite a general outlook that may be common for micro, small, and medium-sized companies, each one has particular challenges that require different measures. However, there are some guidelines that can help outline a strategy aimed at optimizing costs, boosting productivity and, in general, making them better able to adapt to market changes.
5 points that SMEs can adopt in the face of inflation and the current context
Next, I share 5 points that small and medium-sized companies can analyze and/or adopt to protect their finances in the current context:
1. Review costs and budgets in detail
Perhaps this seems like an obvious step, but considering that 6 out of 10 SMEs are financed from the founders’ resources or partners, this step is essential. First of all, it is important to separate business finances from personal finances as far as possible and dig to the bottom of current costs and budgets to find expenses that can be cut or can be more expendable permanently or for some period. of time.
2. Refine and streamline all processes
By making a diagnosis of what can harm the finances of your SME, you will see that There are processes that not only cost money but also reduce productivity, and that is also reflected in a monetary way, so examine what processes you could outsource or adjust so that they do not become a heavy burden. These can be steps as simple as reorganizing your warehouse or the workflows of the various operational teams.
3. Have an emergency fund
For both personal and business finances, this point is an obligation. Emergencies of any kind happen when you least expect it. And in these scenarios, the best thing we can do is have a cushion that cushions the difficult moments, something that also allows us to have the necessary liquidity when required.
4. Pay attention to who your customers are already
Marketers know that it costs a lot more to try to attract new customers than it does to retain existing ones. Thus, it is essential to take care of those who use your business constantly and give them a service that lets them know that they are important to you and your business. This means giving them options that make interaction with your business convenient and memorable.
5. Invest and reinvest wisely
One way to get ahead of financial problems is to invest in things that add value to your business. For example, during the pandemic, many businesses had to stop their operations because they did not have the channels that would allow them to operate remotely. Small businesses began to have contact with their customers and sell through instant messaging services or social networks. There are many solutions that allow you to add value to your business, especially in times of accelerated adoption of technological tools.
As I mentioned, there are no recipes to protect the finances of an SME, especially in times of high economic uncertainty such as high inflation, but the above aspects can help to have a starting point that allows an evaluation of where the market stands. business and how you can create a strategy that helps overcome financial challenges.
By: Alicia Pinera
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