The Importance of SMEs.

I´ve always found interesting how many governments, especially in Latin America, seem to give much more importance to big companies instead of small and medium enterprises. SMEs are those that have a small number of employees and that, more often than not, have modest profits. Nonetheless, when you look at the numbers, you can quite clearly see that SMEs are actually what really drive the economy and are the biggest factor when it comes to creating jobs.

In general, SMEs are responsible for more than 80% of national incomes and more than 70% of employment. Contrary to popular belief, big corporations are not the most important piece of developed economies. For example, in the United Kingdom in 2015, micro enterprises (from 0-9 employees) represented 95% of all firms in the country.

The importance that an economy doesn´t depend on one or a small group of big firms should not be underestimated.  The bigger the number of small and medium size companies in a country, the more stable and adaptable to change its economy will be. The world is constantly changing (faster and faster every day) and all firms must adapt to those changes. Big enterprises, due to their complexity, structure and size, are slower to adapt to change (think IBM, Nokia, BlackBerry…), while SMEs are much more agile and have an easier time adapting.

Every company is under constant threat from outside changes that are not under their control, these could be political, demographic, environmental or simply changes in trends and preferences. This is the nature of capitalism. Usually, people call it “Survival of the Fittest”, but in reality it´s “Survival of the Most Adaptable”. This is true in both the economy and biology.

To sum up, SMEs are the most important factor for the wellbeing and stability of national economies. They are responsible for the majority of job and income creation and they are even the ones that make economies more adaptable to constant changes.

Note: In relation to this, it will be interesting to see how those oil producing countries that have sacrificed their SMEs in favor of their big, national energy companies will adapt to climate change and the rising of renewable sources of energy.