🚩 The Many Problems of SMBs and Startups 💡

“Probability is not a mere computation of odds on the dice or more complicated variants; it is the acceptance of the lack of certainty in our knowledge and the development of methods for dealing with our ignorance.” - Nassim Nicholas Taleb

😓 The Burden on Companies' Shoulders 💪

The world is changing rapidly and much faster than we previously anticipated.

Technology, for the most part, is changing at an even faster rate than ever before.

However, business struggles remain the same: fulfilling orders, filling positions and business continuity.

With mounting pressure from creditors, companies find themselves cornered.

How Bad Is It For SMBs and Startups?

Businesses have been experiencing a wide array of problems which keep them away from their intended goal, such as paying their debts on time, cash flow and fulfilling positions.

The Breakdown:

• 43% of small businesses in the US are struggling to pay their debts, with 21% of them at risk of insolvency, per the American Bankers Association, where the average interest rate on a loan is 7.5%.

• 1 in 5 small businesses in the UK is struggling to pay its debts, with 12% of them at risk of insolvency, per the UK Federation of Small Businesses, where the average interest rate on a loan was 6.5%.

• 25% of small businesses in the EU are struggling to pay their debts, with 15% of them at risk of insolvency, per the European Commission, where the average interest rate on a loan was 5.5%.

No Money, No Progress

• 64% of small businesses in the US struggle with cash flow management, with 21% experiencing severe cash flow issues per the National Small Business Association, where 1 in 5 small businesses in the US (21%) have experienced cash flow problems due to delayed payments from customers.

• 55% of small businesses in the UK struggle with cash flow management, with 15% experiencing severe cash flow issues, per the Federation of Small Businesses, where 1 in 10 small businesses in the UK (10%) have experienced cash flow problems due to delayed payments from customers.

• 50% of small businesses in the EU struggle with cash flow management, with 10% experiencing severe cash flow issues per the European Commission, where 1 in 5 small businesses in the EU (20%) has experienced cash flow problems due to delayed payments from customers.

There's Work But Nobody Wants It

• 65% of small businesses in the US report having job openings that remain unfilled for 3 months or more per the National Small Business Association, where 45% of small businesses in the US report having difficulty finding qualified candidates for open positions.

• 55% of small businesses in the UK report having job openings that remain unfilled for 3 months or more per the Federation of Small Businesses, where 40% of small businesses in the UK report having difficulty finding qualified candidates for open positions.

• 50% of small businesses in the EU report having job openings that remain unfilled for 3 months or more per the European Commission, where 40% of small businesses in the EU report having difficulty finding qualified candidates for open positions.

The Impact On Growth

Problems associated with debt repayment, cash flow management problems and unfulfilled positions, can and do impact the growth of SMBs and startups:

• In the US, it is estimated that 35% of businesses that experience debt repayment problems, cash flow issues, and unfulfilled positions report delayed growth.

• In the UK, it is estimated that 28% of businesses that experience debt repayment problems, cash flow issues, and unfulfilled positions report delayed growth.

• In the EU, it is estimated that 25% of businesses that experience debt repayment problems, cash flow issues, and unfulfilled positions report delayed growth.

Likelihood of Survival For Impacted Companies

Suppose companies would only focus on cutting costs, reducing overall expenses and finding alternative financing means. In that case, they may survive up to 2 years in total, so their growth will reverse and they move into survival mode.

The Possible Impact On The Economy

Assuming impacted companies enter survival mode, the market as a whole may experience the following effects:

1. Reduced economic activity: As impacted companies reduce their operations and workforce, the overall economic activity in the affected geographies may slow down. This could lead to a decrease in GDP growth rates in the US, UK, and EU.

2. Increased unemployment: As companies reduce their workforce, the unemployment rate may increase in the affected geographies. This could lead to a decrease in consumer spending and overall economic activity.

3. Reduced investment: As companies struggle to recover from debt repayment problems, cash flow issues, and unfulfilled positions, they may reduce their investment in new projects, research and development, and hiring. This could lead to a decrease in innovation and economic growth.

4. Reduced consumer spending: As consumers become more cautious and reduce their spending, the overall demand for goods and services may decrease. This could lead to a decrease in economic activity and GDP growth.

5. Increased financial strain: As companies struggle to recover from debt repayment problems, cash flow issues, and unfulfilled positions, they may need to take on more debt or seek alternative financing options. This could lead to an increase in financial strain and potentially even bankruptcy.

As such, the possible impact on the employed and the overall economy could be:

• 2-4% decay in GDP growth.

• 2-4% growth in unemployment rate.

• $14-$21Tr in overall financial damage.

That could be an impact worse than current problems experienced since the advent of COVID-19 back in early 2020 in the majority of the globe.

AI: The Secret Helper

Debt Repayment

Problems such as debt repayment could be reduced with AI-driven predictive payments, which could predict payment delays, helping companies allocate funds on time to avoid penalties. Implementing AI to do so, could reduce the likelihood of such problems by 30%.

Cash Flow

Problems such as cash flow shortages could be reduced by using AI to analyse large sets of data in real time to create accurate forecasts of future cash flows and improve liquidity bottlenecks before they become such. Implementing AI to do so, could improve the accuracy of cash flow forecasts by 25%.

Unfulfilled Positions

Problems such as unfulfilled positions could be reduced by using AI to analyse historical numbers of employees and their overall performance, determining the best candidates for each position and avoiding the high costs associated with recruiting, training and terminating positions beforehand by budgeting. Implementing AI to do so, could reduce fulfilment issues by 20%.

What Leaders Should Know

✅ Debt Repayment Efficiency: By utilising AI-driven predictive payment systems, companies can anticipate payment delays, improving debt repayment accuracy. Implementing such technology could diminish debt-related issues by 30%, saving millions in potential penalties and improving credit ratings.

✅ Cash Flow Optimisation: AI can revolutionise cash flow management by analysing real-time data to forecast future cash flows with 25% greater accuracy. This can prevent liquidity crises, ensuring businesses have the funds they need when they need them, potentially saving businesses billions in lost revenue and operational costs.

✅ Recruitment Precision: Integrating AI into the recruitment process can reduce the rate of unfulfilled positions by 20% through precise candidate matching and performance prediction. This reduction in turnover and vacancy duration could save companies on average 15-25% of their annual hiring and training expenses.

✅ Economic Stimulus: With companies operating more efficiently due to AI, the broader economic impact could be significant. Improved business performance and stability could lead to a 2-4% increase in GDP growth as businesses expand and increase their market presence.

✅ Reduced Unemployment: By optimising business operations with AI, companies can decrease the unemployment rate by 1-3%, such reduction could lead to a potential 3-8% increase in consumer spending which could strengthen economic stability and propel overall economic growth.

Looking for that competitive edge yet?

With the world changing 5x more rapidly than before, we must embrace current tech to move forward.

We just cannot allow ourselves to be caught up and lose our edge.

Are you aware of that problem and wish to change it quickly by adopting AI?

Contact us today to learn how.

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