Why do SMEs fail in Mexico? Reasons!

A question from why SMEs fail in Mexico, has always been in the environment, below we will give you some reasons why this happens.

Why do SMEs fail in Mexico?

According to statistics, 80% of SMEs disappear before five years and 90% of them do not exceed 10 years, we will analyze this matter.

Now by what do SMEs fail at Mexico?. Let's first analyze the numbers, there are much more than three million financial entities, of which almost 100% are categorized as small and medium-sized companies.

According to the SME credit report carried out by Konfío, there are internal errors that entrepreneurs make when managing their companies, added to external factors, which results in a great burden on their prosperity. We will go on to analyze the main reasons for this phenomenon that affects SMEs in Mexico.

Reasons for the failure of SMEs in Mexico

1.-Not carrying out market research

The most notable or common mistake made by SMEs is not carrying out an initial analysis that provides information on the target audience of a product or service.

What they are looking for, and how is the behavior of the competition. This requires a work plan scheduled and measurable objectives that can be achieved.

If adequate planning is applied, it is possible to carry out actions that clearly establish a plan of how, when and with what goals it should materialize.

2.- Lack of legal advice

By ignoring the legal and tax provisions that a company has or, on the contrary, they lack clear guidelines in this regard, the business will sooner rather than later have problems developing.

For example, a limited liability company is one of the classes of this group most used in Mexico, due to its features and simple regulations. This company is the most common for SMEs and the entrepreneur should know this.

3.- Ignore the attraction of talent

By hiring people who don't empathize with the vision of the company, the business will stall and lose money. This is due to the fact of having to constantly rotate staff or, on the contrary, maintain an inadequate work team.

Additionally, if the intention is to recruit the best talent, there must be a good organizational culture and a favorable and pleasant work environment must be established.

4.- Not having a financial plan

Not being alert with the income and expenses of the business, as well as neglecting the general balance of profit and loss, in addition to not having a financial plan that guides the direction that the business should follow in economic terms, is a way to stop the development .

Also the incorrect search for financing or requesting personal loans to boost the business, will end up impeding the operations of the company. A responsible use of business credit essential to develop an SME.

5.- Forget marketing

Not having a clear marketing strategy is considered a major mistake, as many small businesses have the idea that marketing is expensive and only applied by large companies.

In addition, not having an internet presence in these times affects the positioning of the company. Regardless of how small the company is, it is important to be present in the digital world through social networks or a website, as these help to make themselves known.

It is important to have all the information that digital media can provide since they can be used to carry out constant evaluations of the company's performance.

If the initial income is compared with that acquired after the passage of time, the amount of money invested is evaluated, as well as the procedures that generate the best income and the objectives acquired, there will be information that will define the direction that the company should take. business.

6.- Lack of professionalism

A constant problem seen in SMEs is their lack of professionalization. This means that a more serious approach is required from the company to achieve a quality of product and service that it offers.

Also focus on the standardization of processes and procedures, an improvement in personnel management, an effective control of supplies and their suppliers.

Plan the necessary actions, analyze the statistics and verify the level of leadership of the owners and directors.

In large companies they have an organization chart with directors, executives, endless departments, advisors, etc. Very distant from what happens in SMEs.

Where the survival of the company is linked to the knowledge and direction of the owner. Many of these owners are trained, they are owners, doctors, accountants.

Some others have many years of experience in the work or area they perform, in the products or services they offer; but, it is not enough to face all the challenges that will arise in the business.

In general, entrepreneurs focus on successful products, however, not all variables are considered, sometimes due to lack of time, ignorance, lack of interest or simple inability.

7.- Leadership

Normally, there is a biased view of all the components of the company and their interrelation. Attention is focused on areas that are considered important, individualism is unintentionally promoted.

Wanting to resolve all situations quickly, teamwork fails recurrently. Leaders refrain from involving employees in decisions and do not know how to handle adverse situations.

8.- The operation

The production and service processes are not defined or organized, taking into account the normal times of operation. There are high levels of waste, high costs for errors, omissions or repetition of work.

Lack of qualified personnel due to the inability to attract specialized or professional technical personnel, poor inventory management, lack of quality control or excess of them, late response to problems.

If you want to solve these problems and why SMEs fail in Mexico, in addition to knowing how to solve it, making a manual of processes and procedures, read the following article How to make a procedures manual?

9.- Results

The lack of handling of the management indicators leads to the results being analyzed intuitively, if desired, only using the owner's observation as a method.

The information that the middle managers can give is used, without any measurement methodology or time periods to carry it out.

In small companies it is very common to link personal expenses with those of the business, preventing an effective evaluation of profitability.