How Can SMEs Thrive in Inflationary Times?

The gradual rise in prices and slow decline in purchasing power caused by inflation has hit small businesses, both in the US and Mexico. According to a Goldmans Sachs’ survey, 88 percent of small-business owners in the US say inflationary pressures on their business have increased since January 2022, while in Mexico the cost of supplies keeps rising, with an inflation rate of 7.88 percent in June.

Inflationary pressure adds to the difficult post-pandemic recovery that most Small and Medium-Sized Enterprises (SMEs) were already facing. In Mexico, studies reveal that 92 percent of microenterprises and 87.8 percent of SMEs in the country had a decrease in income. This was pushed by a 73 percent and 71.2 percent decrease in demand, respectively.

Despite the tough outlook, innovation and cooperation can lighten the tunnel. It is key that SMEs improve their processes to reduce costs and be able to cope with higher prices, while creating alliances that allows them to reinforce local commerce and detect new business opportunities.

Investing and improving the use of technology lets SMEs gain better knowledge of their current and new customers and provides for better tracking of the whole sales process, including the different points of contact, which can help them improve processes and focus on those areas that are delivering bigger benefits, as well as make adjustments to those with higher costs.

An important example is the agreement between AmCham/Mexico and the Mexican Association of Secretaries of Economic Development (AMSDE) to promote trade and investment, along with training for SMEs in e-commerce. This is allowing many companies — Visa, Mercado Libre, Meta, Amazon, just to name some — to expand their free training offer nationally.

Another key is to take advantage of the strategic bond between Mexico and the US, particularly through the USMCA. There are several tools included in the agreement that SMEs may use, allowing them to promote cooperation, exchange information, and establish a dialogue among countries, including, of course, Canada.

Increasing the interchange of knowledge and commerce between countries will allow SMEs to implement best practices and establish plans and programs to address core elements for recovery. In both countries, SMEs represent more than 99 percent of all companies, which translates into a great hub to receive support and create new ideas.

Lastly, it is important to note that SMEs are not the only ones facing this context. Customers are aware that prices are increasing and are searching for new ways to reduce costs, but they are also willing to support local businesses. There is recent knowledge of how to pivot and survive hard times, which everyone is putting into practice.

For a strong, sustainable economy, SMEs must not only survive but thrive. I invite you to check the resources on AmCham’s SMEs Toolkit to get new ideas to successfully navigate these challenging times.

*Ana López Mestre is the Executive Vice President and General Director of the American Chamber of Commerce of Mexico, a business chamber that represents more than 1,200 US companies based in Mexico City, Guadalajara, and Monterrey, and which are responsible for generating 21 percent of National GDP and more than 8 million formal, direct and indirect jobs. She is a mentor of the Executive Women Development Program, has been recognized as one of the 100 Most Powerful Women in Mexico by Expansión and Forbes magazines, and has received the Exceptional Women of Excellence distinction by the Women Economic Forum Ibero-America.