This happens when there is no constant planning and review of financial plans in the short, medium and long term; particularly, when operating under the assumption of an impossibility of untimely crises, that is, companies that are not clear about their emergency plans, will hardly be victorious.
One of the big problems of these companies is that entrepreneurs generally have little room for action, due to financial limitations, planning and even market and business knowledge. Just look at the figures Radiography of Entrepreneurship in Mexico 2021, where it is detailed that the main reasons for failure in SMEs are lack of liquidity, lack of knowledge of the market and poor business management.
The urgency of planning
SMEs are the economic backbone of countries like Mexico. Most of the country’s GDP and job creation depend on them and despite their areas of opportunity, the truth is that they are also resilient by nature. SMEs are used to operating under sub-optimal levels and, therefore, must be constantly adapting to inclement market conditions: from trying to compete against large conglomerates, to facing global pandemics.
But this resilience, in the face of difficult scenarios, must be accompanied by optimal and constant planning, such as seeking strategic and flexible financing, implementing savings schemes and inventory management, training or risk mapping, to name a few.
Watch out for cash flows
Taking all of the above into consideration, it is essential to understand that taking care of cash flows for an SME has never been so important. Probable sales declines, project delays or product shortages should be considered. But this should not mean defeat beforehand; on the contrary, it implies analyzing the context to articulate a business strategy with real growth projections, to wait for a better economic moment in the future.
The night of the ‘zombie’ companies
Despite everything the pandemic has represented, millions of SMEs have survived. And they will continue to survive for the most part. But in what terms? If the operation remains weak and dependent on daily cash flows, survival comes at the cost of the quality of life of entrepreneurs and their families. The result: ‘zombie’ companies that can barely walk, that are subordinated to fate. And, of course, on the verge of slow, agonizing deaths.