• A report from the WEF showcases SMEs to be a vital part of global economy. Yet many are facing significant challenges
• Many leading business schools around have researched how SME leaders can overcome these challenges
• Leadership attitudes, investing in new areas such as ESG and inviting new skills into the team can all help SMEs thrive

SME’s have always been big business. A report from the World Economic Forum (WEF) in 2022 shows that, despite their size, small businesses carry a lot of economic responsibility, providing  70% of jobs worldwide.

And, today with the rise of short-form content on social media such as TikTok, small businesses are getting more eyes on them than ever.

TikTok itself recently launched research into how its users interact with SMEs and found that 44% intentionally use TikTok to engage with SMEs, and 33% stumble across small businesses when scrolling through their feed.

Furthermore, 88% of those who stumble upon SMEs by chance were found to have changed their shopping habits beyond the app, inspired to shop more locally.

However, despite contributing so much, SMEs face several steep challenges on the path to success. From keeping up with tech advancements, meeting the rising costs of day-to-day business practice and navigating economic uncertainty, to rising above the competition, finding the right people and retaining them – the list goes on.

The WEF’s report states that, “Business leaders also cite talent acquisition and retention (48%), culture and values (34%), funding and access to capital (24%), as well as non-favourable business policy environments (22%) as their biggest challenge.”

The report goes on to suggest that businesses can boost their resilience by building stronger business frameworks.

It’s easier said than done. To help set SME leaders on the path to reinforcing their operations and overcoming some of the most challenging hurdles we’ve explored some of the best advice from management experts around the world.

Here are just three ways in which SME leaders can help ensure their business success for years to come.

Be a humble leader

Research from the University of Sussex Business School shows that leaders who adopt a humble attitude in their professional lives are better able to create a safe environment for their team members, which helps enhance team performance.

Dr Elsa Chan found that leaders who are tentative and humble, create a greater sense of unity and purpose amongst the workforce, help alleviate employee anxiety, and enhances their problem-solving skills which inevitably leads to increased revenue.

 Humble leaders, Dr Chan found, focus on three things.

1. Collaboration: A humble leader doesn’t just present and make their team work on their own ideas but asks everyone for their thoughts and considers them all
2. Accountability: A humble leader recognises their own mistakes, and recognises and celebrates the skills of others,  whilst consistently seeking opportunities for personal and professional growth for themselves and their staff.
3. Empowerment: A humble leader creates a low-risk space and makes sure all team members feel valued by contributing and testing new ideas.

Read more about Dr Chan’s study here.

Hiring freelancers can boost business success

Freelancers make up around five million workers of the UK workforce and, According to Professor Burke, Dean and Chair of Business Studies at Trinity Business School, “gig workers bring with them a whole host of benefits to individual businesses.”

Burke found in a study that freelancers can provide the innovation and expertise that the firm lacks allowing for a faster rate of business growth.  For SMEs with small workforces looking to extend their reach and capability, freelancers could provide the skillsets they need, along with a fresh perspective.

In fact, his research found  by increasing the number of freelancers operating in an economy by 10%, entrepreneurship levels rise by 1% further boosting SME growth.

To find our more about the study, you can read the full article here.

Investing in ESG builds resilience

Sustainability has become more and more important as the years have gone by and the climate crisis has got worse.

To help meet the sustainability targets set by the United Nations and other global bodies, organisations, big and small, have been put under increasing pressure to invest further in, and commit to, ESG initiatives.

While such investments often mean venturing into the unknown for any organisation, for SMEs the risks can be significantly higher. However, research from Vlerick Business School shows that committing to ESG can actually provide a benefit to these organisations.

Low-resilience SMEs are more likely to engage with greenwashing but once they’re able to think of the bigger picture, they can realise that the benefits can help them prosper.

A study, conducted by Professor David Veredas and doctoral researcher Dimitrios Kolokas, shows that investing in ESG initiatives boosts a firm’s resilience and decreases its credit risk.

The research shows an 11% increase in an SME’s ESG performance will decrease its credit risk by 3.5%.

SMEs, the researchers say, can become more creditworthy when they increase their ESG performance. However, low-resilience, high-risk SMEs do not enjoy the perks of ESG practices.

You can read more about the research here.

Small businesses need outside support

There are many ways that small businesses can overcome the challenges they face. However, they can only do so much alone, and are at a disadvantage compared to large businesses, often lacking bargaining power or the ability to swiftly access and adapt to new markets.

It’s difficult for small businesses to have strong bargaining power or to properly access and adapt to new markets because by nature they work small and grow at a slower pace.

They also face disadvantages at banks. The World Economic Forum report shows on average, 45% of trade finance applications from SMEs are rejected by banks, compared to the 17% rejection rate of large and multinational firms (ADBs)

Commenting on the WEF report, Rashimah Rajah, a Professor at the National University of Singapore said, “SMEs and mid-sized companies have unique strengths in their ability to pivot their business models to be more future-ready…However, to fully realise their potential, they also need the support of policy-makers in recognising their credentials as well as in rewarding sustainability initiatives.”

However, as research has shown that up to 80% of government-backed-up start-ups fail, perhaps policymakers too should be seeking advice to improve their practices.

After all… it makes economic sense to do so.

By, Sharmin Ahmed

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