Five ingredients to boost SME business

In Europe, small and medium-sized enterprises are the backbone of the economy. According to recent data from the EU Commission, there are about 23 million small and medium-sized enterprises in the 27 Member States. They make up almost 99% of the total number of European companies, employ about 65% of the private sector workforce, and contribute more than 50% of the added value generated in the European Union. If we zoom in on Italy, SMEs represent an even larger part of the economic fabric than the European average. It is estimated that there are around 4.5 million SMEs, which make up more than 99% of Italian companies and that they employ around 78% of the private sector workforce, generating more than 60% of national added value.

Based on this premise, the growth of this important asset is the mission everyone should have in mind. Grow or go out has for years summarised the growth must that most companies have pursued in order to play a leading role not only in the domestic, but also in the European and global league. Small and medium-sized companies and their growth are the focus of attention locally, nationally and supranationally, and in the recently published report on Europe's competitiveness, Mario Draghi considers them crucial to Europe's economic growth and innovation.

There are several enablers for the growth of this type of enterprise. Back in 2018 on these pages, I tried to summarise them using the metaphor of a recipe. From my privileged observatory, the ingredients of the recipe for growth are five. The first is strategy: the ability to translate the entrepreneurial dream into a clear vision translated into a business strategy. By strategy I am referring to creating the conditions so that in a small or medium-sized company there is, every day, clarity and sharing of where one wants to go. Strategy in action then.

The second ingredient is people. A brilliant and winning strategy does not exist without people and therefore an organisation ready to implement it, every day, step by step. Like any living organism, a company only has the capacity to adapt and change if the individual cells that make it up have this message written in their DNA, so you need to invest all your time in finding the right people, putting them in a position to create impact and thus be motivated, and growing them. If people don't grow, the company doesn't grow.

The third ingredient is innovation. It is not easy for SMEs to innovate: while this is true, it is equally true that SMEs must innovate because if they do not, they are unable to stay in the market and compete with the big ones. What is difficult for SMEs is to grow their own culture of innovation with small budgets and often without much structure. But those that succeed are second to none. Then there are the markets. The fourth ingredient is definitely the markets on which to sell one's product or services and therefore the channels with which to reach them. Underestimating the choice of markets and the testing phase of one's own products or services in new markets and new channels to reach them, often thwarts everything else and turns the recipe from perfect to inedible. Finally, finance. The fifth ingredient is the economic resources available to finance everything we have talked about so far. The ingredient here is clear, but as with flour, it is difficult to think that there is only one. The same applies to the instruments and forms of finance to support growth. One thing is certain: traditional debt, which is well known to businesses, is not and will not be enough to meet the challenges of growth, especially in the very complex and multifaceted context we face today. I said at the beginning that there are five ingredients in the recipe for growth and perhaps I was inaccurate because there is a secret ingredient that makes the recipe for growth effective: relationships. Relational capital is key because there is no strategy, market, innovation or finance that is sufficient if it is not well and carefully amalgamated with relational capital, including that relating to the supply chains that are so crucial for an economic and entrepreneurial fabric like the Italian one. The recipe for growth is the synthesis of what we as Elite, part of the Euronext Group, do every day: we support companies, entrepreneurs and managers in the most fascinating and impactful work: doing business and growing. Only if as a country we are able to channel all our efforts towards the mission of making businesses grow, will we be able to say that we have been good chefs, perhaps even star chefs.