Pedro Brito: There are limiting beliefs that prevent SMEs from growing

According to the third edition of the SME Barometer Magazine, conducted in February 2023 among nearly 1,000 companies, 60% of SMEs say they have no interest in exporting. Almost 79% of companies do not feel pressured regarding the climate emergency. More than 86% do not use risk management tools and most do not recognize any need to use them. 71.8% of companies had not made any investment in digital transformation by 2022. 

Pedro Brito, Associate Dean of Nova Executive Education, points out a poor level of knowledge and training among the decision-makers of the surveyed SMEs and the existence of two main limiting beliefs that prevent Portuguese SMEs from growing.

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Belief #1: "Besides having few resources, we don't have the scale to go international.

Many SMEs have limited financial and human resources to invest in new markets and establish international business relationships or respond to large volume orders. However, they do not join with others on an internationalization journey, diluting the risk and increasing the gain for the parties. Lack of financial incentives and associated language barriers are other "excuses" for many companies to ignore the opportunity to export and internationalize. "SME decision-makers need to understand that only with more knowledge and training on the challenges of exporting, such as international logistics, regulation or trade barriers, and only with a collaborative attitude, joining other organizations and gaining scale, will it be possible to grow sustainably. The fear of losing control can be reduced and the benefits for companies are exponentially greater than the traditional survival strategy focused only on the national territory," explains Pedro Brito.

Belief #2 "The sustainability issue is not something that impacts my business directly" 

The European Non-Financial Reporting Directive (2014/95/EU), requires companies with more than 250 employees to report information on their performance in areas such as environment, human rights, social issues, diversity and anti-corruption.
"SMEs working for these large companies as suppliers or subcontractors are going to be very exposed as these companies will require SMEs to follow similar sustainability practices. Small and medium-sized companies that do not comply may feel the impact directly on their revenues and ability to attract qualified talent, since large companies will increasingly select partners that respect these guidelines," clarifies Pedro Brito. 

 These two beliefs have something in common: the level of knowledge and training that the decision-makers of many SMEs show to have is still very limited. Therefore, Pedro Brito admits that "SME access to quality education is a critical factor for the competitiveness of companies and of our country. 

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SME 2023 BAROMETER RESULTS

By 2023, investment by managers of Portuguese SMEs has decreased in all areas except people.

1. Focus on retaining people: only 47% of respondents consider hiring, mainly in the operations area (50.5%). In 66% of SMEs there will be no changes in staffing (Results SME Barometer 2023 page 18, Q12)

2. The concern with sustainability has decreased: most companies still do not know, measure or have plans on environmental impacts, with only 21.1% of the sample considering themselves threatened by the risks of climate emergency. However, they are more aware of the quality processes/certifications that contribute to business sustainability, through PME Leader certifications and training. (Results PME Barometer 2023 page 15, Q5)

3. The use of financial support decreased: to this extent, almost 15 percentage points (p.p.) in 2023, with greater expression in the case of bank financing (26.1%), followed by State financing (11.5%). (SME Barometer Results 2023 page 22, Q12)
More than 70% of SMEs do not feel the need to use risk management tools, of which 32% are unaware of their existence. (SME Barometer Results 2023 page 32, Q18)

In sales only 18.2% maintained the volume of the previous year and, of the 15.1% who recorded decreases, most believe they will be able to restore sales levels before the pandemic. (Results Barometer SME 2023 page 29, Q19)
In exports, only 24% of respondents export, more than 70% only to Europe (Spain, France and Germany) and the rest to Africa (Angola and Mozambique).

(SME Barometer Results 2023 page 35, Q29c)

4. Marketing investment remains low: intentions to continue to invest in 2023 remain, although with a very low percentage (Results Barometer SME 2023 page 38, Q20)

The choice of tools in digital marketing falls on campaigns in social media (63.8%), trade marketing in e-commerce channels (38.7%) and SEM (campaigns in search engines, 38.4%). (Results Barometer PME 2023 page 40, Q23)

There is still room for companies to follow the digital transformation, especially through digital platforms, for the visibility they provide, an investment that has dropped significantly, but the companies surveyed do not consider them relevant to their business. (Results Barometer SME 2023 page 46, Q25)

The Barometer PME Magazine was launched with the aim of understanding the changes and the real challenges that the Portuguese business sector faces in the areas of sustainability, people, sales, marketing, and digital transformation. With the largest participation recorded over the past few editions, 938 companies were surveyed: 700 micro, 205 small and 33 medium-sized, with a higher concentration in the North region and the Lisbon Metropolitan Area. 

 More information at https://pmemagazine.sapo.pt/barometro-pme-magazine/