WHY INTERIM MANAGEMENT CAN HELP MICRO AND SMALL BUSINESSES GROW

This is Part-Time Genius Blog on how to grow your business in a profitable and sustainable way.

WHAT – WE ARE A MICRO AND SMALL BUSINESS ECONOMY

I was very surprised to learn that according to Entrepreneurship statistics (The Federation of Finnish Enterprises, 2015), 99% of the companies in Finland were either micro businesses or small businesses. Micro businesses (265 041) employing up to nine people represented 93,4% of all companies and small businesses (15 559) employing from 10 to 49 people respectively 5,5%. Medium and large companies represented only 1,1% of nearly 284 thousand companies in total.

From year 2001 to 2015, companies up to 49 employees created over 84 thousand new jobs whereas almost 15 thousand jobs were lost in companies larger than 50 employees. Nearly half of the jobs were in micro and small businesses, contributing to 37% of the overall turnover in 2015.
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Even though figures are few years old, I believe that the relative proportions are accurate enough to make the point – Finland is a micro and small business economy.

Number of companies in Finland 2015

SO WHAT: BUSINESSES WERE, THEY ARE AND THEY WILL BE SMALL

Provocative statement of the title made by Pekka Usva at Part-Time Genius, claims that businesses up to 49 employees are locked to be small now and in the future if the current thinking won’t change. Let’s open the logic behind the claim.

The biggest challenge for small businesses is growth, to be more specific, profitable growth.
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Why profitability is so important? It is the prerequisite for company’s existence, at least in long term, as profit is the excess fuel that can be invested back to company after all company’s liabilities have been covered. Much of the performance and manoeuvring flexibility is based on profitability and when it is taken away, company will be in trouble no matter the size.

Why growth is so important? In macroeconomics, growth creates new job opportunities and decreases unemployment, increases consumption which drives investment opportunities, and does good for our tax revenues allowing us to enjoy of a wide spectrum of public services.

In the company level, it positions the company positively in the eyes of the investors and is the key to higher overall profitability in long-term due to scale economies. Simply – growth creates opportunities and well-being (yet not fully without reservations as we will find out in the forthcoming blog posts).

That’s all great – what’s blocking the micro and small companies from growing profitably, and fast from micro businesses to medium and enterprise scale?

The root causes can be backtracked to act of balancing the four critical elements of a successful business. Micro and small companies are often short of expertise, skills, competencies and most importantly experience when it comes to making profitable growth that scales, especially internationally.

The key dilemma to micro and small companies is, how to acquire or rather have afford to acquire a person with such an expertise and experience. When company’s financial resources are extremely lean, company might not be able to compete for the required talents, even in a case the entrepreneur would be willing dilute the equity.
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This is truly a catch-22 situation. In order for company to grow, it would need the people crucial for the growth, but it’s missing the financial resources to recruit. As an end result, the growth will be delayed or stagnated altogether.

NOW WHAT: BREAK THE GROWTH LOCK WITH EXPERTISE-AS-A-SERVICE

The traditional way to solve resource, competence or skills gap was recruitment – it was the hammer company had and all the needs were seen as nails. Fair – recruitment is still a very valid tool but not necessarily the fastest and best-fitting for businesses with rapidly changing workforce quality and quantity requirements.

Kauppalehti, a multichannel news outlet focusing on economic phenomena and the money market in the digital era, published recently an article (Kauppalehti, 2018) on interim management in Finland.  Article was based on a survey conducted by K2 Search, an interim management house part of Wise Company, a Stockholm stock exchange listed HR and recruitment company.

Survey revealed that companies who have used interim management service were extremely satisfied with the results and are likely to use the service again in the future. For me, this proves the core promise of the service – good return on investment and customer value.

In those companies, interim management service was used from product launches, opening international markets to IPO and M&A arrangements - not only for company reorganization and cost cutting exercises that are often considered to be the sweet spot for interim management.

According to article, even though interim management is gaining ground, it is not widely used by Finnish companies’ due to low visibility of the service and relatively small number of service providers. Whereas in Sweden, UK and Netherlands interim management services are being regularly used, the DIY culture is prevalent in Finnish companies.

Finnish companies take here an unnecessary competitive handicap. 

​According to Pekka Usva at Part-Time Genius, interim management works like any modern service where the user pays for the consumption, service scales depending on the needs, is available without long lead-time, and when the assignment is finished so are the attached costs.

Interim management can be the solution for micro and small businesses to enable access to needed skills and expertise in an affordable and flexible way, immediately and with low risk.

The saying “nothing stays the same, it either grows or shrinks” is very valid in this context: if your company doesn’t grow, your competition will.

Should you give a try? See how Part-Time Genius can help you – let’s meet and talk more about it.

BR Pekka at part-time-genius
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Sources:
Kauppalehti 2018. Väliaikaiset vuokrapomot yleistyvät: Vuokrapomo on usein saaneraaja - "Hän kerää kamansa, kun määräaikainen työ on tehty".
The Federation of Finnish Enterprises 2015. Entrepreneurship statistics 2015.