The time is no longer for theory or ideologies, but for business staging!

Due to developing in an anxiety-inducing climate and having their heads in the wheel, the managers of SMEs and ETIs often no longer know what to do. For this, it is not big speeches that help, but a return to the basics: continue to dare, regardless of the context; examine its sources of revenue and profitability; and work on its operational organization to strengthen its strengths.

At the end of October 2022, very gloomy figures were published about the outlook for French companies. CPME spoke of “150,000 businesses at risk” in its study on the economic and financial situation of VSEs-SMEs in times of energy crisis published on 31 October[1]. The OFCE warned of a risk of “cascading failure”. As for the company Altares, it noted a jump of 69% in collective cases initiated in the third quarter of this year compared to the same period in 2021 and their monthly increase of +40 to 45% since February.

At the same time, the injunctions given to company managers do not cease. We expect them to reindustrialize France, accelerate their digital transformation, make their energy transformation and reinvent their products to make them “ environmentally friendly », that they increase their salary, that they live up to expectations about meaning and balance “professional life/private life”, etc. But nothing could be less simple!

Difficulty responding to orders

Difficult to reindustrialize with non-existent materials and lack of labor, let alone skilled labor. It is also difficult to switch to the production of all-electric products, for example in the automotive industry, when the components are missing. The CPME study cited above indicated that “the supply difficulties in raw materials affects more than half of the companies (56%)”.

It is difficult to accelerate digitally without having the necessary funds for the investments, as the cash is absorbed by the inflation of raw materials and energy due to the lack of a tariff screen for many SMEs. In the short term, the observed investments are mostly linked to the payment of significant public support, as was the case for the new STMicroelectronics plant near Grenoble.

Finally, it is difficult to increase wages without increasing turnover and profits. Too few companies have yet reflected the increase in production costs in their prices. The same CPME survey still noted that “inflation affects 90% of companies, leading to an increase in the cost price of more than 10% for 53%. However, a third of them (31%) claim not to be able to pass this increase to their selling price”.

And we can go on like this for a long time…

Go beyond intent and get back to basics

So what to do? When you have your head in the wheel, you quickly forget the “basics”. Lease, three points are essential.

  1. First and foremost, guard against any wait-and-see attitude that would do more harm than good to the business by preventing it from being ready to return.
  2. Then go back to the basics of management and development.
  3. Finally, focus on business staging to highlight the company’s potential and prepare it for the future.

The risk of waiting, we have already talked about that here[2] : it is contrary to the position of the entrepreneur and must be avoided at all costs. Moreover, not making a decision can put the company in a difficult situation in the medium term and leave the field open to its competitors. More than ever before, the manager of an SME in a crisis situation must act like a ship’s captain – charting the course, explaining the roadmap and accompanying his crew throughout the crossing, while knowing how to rely on each other’s skills. A task that is certainly difficult, but which he will be able to carry out if he does not stay alone and dares to let himself be supported.

With regard to the basic principles of management, the entrepreneur must again ask himself the question of what motivates the purchase of its offer and makes it a “must have”. Let us never forget that the primary purpose of a business is to generate enough revenue to pay its employees, pay its social security contributions and taxes, and create a margin to invest for the future. In the current context, the manager must carefully study his business model and his various sources of income to take measures to take into account changes in markets and customers. Another point: surpass the increases induced by inflation, because a company cannot last over time if it sells at a loss.

Last handle: do business staging, in other words work with the operational structuring of the company. This consists in highlighting its development potential and then giving it the operational capacity to implement the strategic plan that the manager will have defined to reveal this potential – i.e. turn it into revenue. To do this, everything will be reviewed: organization, internal processes, available skills, etc. “Annoying” issues must also be addressed. It is a question of gaining height in relation to a purely accounting vision (balance sheet, operating result, margin, valuation, etc.) and of assessing the value of the SME as precisely as possible. Failure to do so may ultimately result in a risk of undervaluation.

Intention is no longer enough. In 2023, it will be necessary to generate results and be able to measure the effect of the measures implemented, as you bring the teams aboard in this return to basics and this new adventure. Nevertheless, some indicators suggest that business leaders will be able to seize the moment: by the end of 2022, 31% of French SME managers are looking for financing solutions for projects, compared to 24% who look to their bank for financing needs. Let’s encourage them and help others join the movement.

[1] https://www.cpme.fr/espace-presse/communiques-de-presse/resultats-de-lenquete-cpme-sur-la-situation-economique-et-financiere-des-tpe-pme-en-periode- energy crisis

[2] https://www.forbes.fr/entrepreneurs/lattentisme-pire-ennemi-du-chef-dentreprise-face-a-la-crise/

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