SMEs’ crucial role in global recovery

By Hans Leijten, Regional Vice President-East Asia, Regus | Jan 6, 2012

The common image people have of small and medium enterprises (SMEs) is that of a sector battered by recession, overlooked by governments, and starved of credit by banks. The sector may have gone through tough times, but it’s also at the forefront of recovery.

Our experience of working and talking with hundreds of thousands of SMEs worldwide shows that plenty of SMEs are thriving, their growth unchecked by the storms of recent years.

In early 2011, a research commissioned by Regus involving 17,000 companies worldwide found that 46 percent of small companies had increased their revenues over the previous 12 months. Over three-quarters (77 percent) expected revenues to rise in the next 12 months. Their level of optimism was similar to that of large companies, but they showed greater ambition in their future sales and marketing plans. For example, 39 percent of small companies plan to increase marketing expenditure, compared to 23 percent of large companies.

Humble but nimble
There’s no doubt that the recession hit SMEs hard. They had fewer assets to take them through tough times. With a narrower customer base, and fewer product lines and markets, they were also more vulnerable than their multinational counterparts.

However, it's not the complete picture of the sector. The Economist describes SMEs as ‘humble but nimble’. Ludo Van der Heyden, a professor at French business school INSEAD, told the magazine that SMEs are often better at managing downturns than big firms because they’re more flexible and efficient. They’re also closer to their customers and as such often builds more trust internally between managers and workers, and thus, have greater labor flexibility.

Regus’ own experience of working with SMEs worldwide backs this thesis. For example, we found that 76 percent of small companies offer their staff flexibility in working arrangements, compared with 66 percent of all businesses. While the uptake of flexible working attitudes and polices in China is currently lower than the global average of 76 percent, Hong Kong SMEs are more in line with their global counterparts.

 In fact, 75 percent of Hong Kong SAR businesses say that they allow employees to work at locations other than the office compared to 65 percent in the Mainland, which suggests a growing mobile workforce in Hong Kong.

SMEs can be flexible about where staff works because they have no legacy of fixed real estate. Instead of having to populate existing city-center offices, they can let staff work on the move, at business centers, at home ore wherever they are most productive. Instead of paying fixed rents on fixed spaces, they can use polycentric, flexible workspace arrangements that grow, move or contract with the company.

Some entrepreneurs eschew physical premises, preferring virtual office services. Instead of office or desk space, they get a business address to use on stationery, phone number and receptionist, and call and post management.

Virtual offices and flexible spaces are not just for start-ups; they’re also used by established companies, especially if they want to expand their global footprint. For example, a Regus customer, Geneva Consulting Group, wanted to be closer to its international clients in Europe, so the company signed up for a Regus virtual office based in Paris and used the Regus network of European meeting rooms to meet clients. It created a strong European presence, without having to establish fixed offices overseas.