The Growing Complexity of Running an SME: What the Research Reveals About 2025's Biggest Operational Challenges
Small and medium enterprises face an increasingly complex operational landscape in 2025. Recent research from leading global institutions reveals critical challenges affecting SMEs worldwide, with intensity varying significantly by region and stage of development.
What Are the Universal Struggles Every CEO Faces?
The data is clear: financing and talent dominate the challenge landscape for growing companies.
Consolidated list of top operational challenges
Access to Capital Remains the Critical Constraint
The World Bank estimates a $5.7 trillion finance gap for MSMEs across 119 emerging markets, with 40% of formal MSMEs being credit-constrained. The OECD reports that in 2023, the cost of credit for SMEs rose by 6%, while bank lending to SMEs fell by 9%, a drop not seen since the Great Financial Crisis.
Access to Capital is increasingly Challenging
This isn't just an emerging market problem. OECD data shows SME bankruptcies rising by 11% in 2023 due to tight financing conditions with high interest rates and economic uncertainty. Among European scale-ups, 38% cite insufficient liquidity as a major challenge, up from 26% in 2023.
For companies looking to scale, this financing constraint directly impacts growth velocity. You're competing for scarcer, more expensive capital precisely when you need it most for expansion.
The Talent Crisis Intensifies
40% of scale-ups identify finding the right talent as their biggest challenge, with 34% indicating that candidates' salary expectations are difficult to reconcile with their liquidity constraints.
Overarching look at talent challenges
The challenge is particularly acute in digital capabilities. 90% of supply chain leaders say their companies lack sufficient talent to meet digitization goals, a figure unchanged since 2020. With as many as 3.8 million net new employees required by 2033 to satisfy manufacturing labor demands, the workforce gap represents a fundamental constraint on growth.
This isn't just about finding bodies—it's about finding the right expertise to support the digital transformation your business needs to scale competitively.
The criticality of finding the right talent
Is Digital Transformation Really a Top Priority?
The research confirms what most CEOs already know: digital transformation has moved from optional to essential.
57% of US SMEs cite rising operational costs as their top internal challenge, with many turning to AI and digital tools to drive efficiency and fuel innovation. Among European scale-ups, 28% identify operational challenges as one of the biggest obstacles to achieving growth ambitions, up from 22% in 2023.
Yet execution remains difficult. 39% of operations leaders say lack of skilled digital talent is their biggest challenge to digitizing operations, while 74% cite talent acquisition and retention as a moderate or major risk to their company's operations.
The catch-22 is clear: you need digital transformation to improve efficiency and competitiveness, but you lack the talent and resources to execute it effectively. This is where operational strategy becomes critical—knowing what to digitize, when, and how to build capability without breaking the bank.
How Do These Challenges Differ by Region?
Regional variations are significant, and understanding these nuances is essential for any CEO considering geographic expansion.
North America: Cost Pressures and Talent Competition
68% of US SMEs report meeting or beating expectations in 2025, with much of that success fueled by focused cost control (28%), smarter supply chains (15%), and market expansion efforts (18%). However, 67% see trade policy shifts and tariffs as the top hurdle to international expansion.
A different sort of confidence
The talent market remains extremely competitive, with companies of all sizes competing for the same skilled workers, particularly in technology roles.
Europe: Regulatory Complexity and Energy Costs
91% of Dutch scale-ups are confident they can continue or accelerate their growth trajectory, despite challenges. However, 36% struggle to win new customers in an uncertain economic climate.
Tales from Europe
European companies face particularly heavy regulatory compliance burdens, from GDPR to employment regulations to sustainability reporting requirements. Energy costs remain elevated following geopolitical disruptions, adding to operational pressures.
Emerging Markets: Infrastructure and Economic Volatility
The challenges intensify in developing economies. In Nigeria, 67% of surveyed MSMEs reported decreased demand for their products or services, with 38% attributing it to high costs and 36% to low purchasing power of consumers. Nigerian MSMEs require an estimated $32.2 billion in financing, yet face limited private sector lending, poor infrastructure, and lack of documentation that hinders access to credit.
Headline inflation in Nigeria reached 28.92% in December 2023, driven by increased food prices, currency devaluation, high import bills, and rising energy and logistics costs. Infrastructure deficits—unreliable electricity, limited connectivity, logistics challenges—create operational hurdles that absorb management time and resources.
Same desired ending, different challenges await
Yet opportunity exists. US SMEs view Europe (35%), Asia (28%), and Latin America (25%) as top targets for future growth, with countries like India, Vietnam, and the Philippines expected to lead global trade growth.
What About Supply Chain Complexity?
This challenge hasn't disappeared post-pandemic. 90% of companies cited supply chain disruptions as a challenge in 2024, though only 10% of European scale-ups cite sourcing/supply chain issues as among their biggest challenges, down from 18% in 2023.
The nature of the challenge has evolved from acute disruption to ongoing complexity—longer lead times, higher logistics costs, and the need to diversify suppliers all strain both finances and operational capacity.
Are There Hidden Challenges CEOs Should Watch?
The research reveals emerging pressures that many CEOs may be underweighting:
Sustainability Reporting Burden
SMEs struggle with over 270 different carbon reporting solutions alone, with limited interoperability. As regulatory requirements intensify, particularly in Europe, this administrative burden will only grow.
Cybersecurity Risks
As connected systems create new cybersecurity risks, 40% of respondents reported six to 10 cybersecurity breaches in the past year. For SMEs without dedicated security teams, this represents both a operational and reputational risk.
Operational Risk from Transformation
65% of manufacturers rank operational risk as the first or second priority requiring mitigation when pursuing technology initiatives, with risks including business disruption and losses stemming from failed initiatives.
How Do You Turn These Challenges Into Competitive Advantages?
The data reveals a critical insight: these challenges aren't going away, and they're becoming more interconnected. Companies struggling with talent acquisition find digital transformation harder. Cash flow pressures limit investment in the systems needed for international expansion. Regional infrastructure gaps prevent access to high-growth markets.
But here's what separates successful scaling from expensive false starts: strategic expertise in international business operations.
CEOs who understand that compliance requirements in Germany differ fundamentally from the UK, that cash flow management in Brazil requires different approaches than Mexico, that talent strategies in Singapore won't work in Vietnam—these CEOs scale successfully and profitably.
Seeking the Path Forward
How LouAnn Conner and SagaciousThink Can Accelerate Your Scale
The research is clear on what challenges exist. What it doesn't tell you is how to navigate them in your specific situation, with your resources, targeting your markets.
Converting access skills and resources remains challenging
The 60-Point Execution Gap
This gap exists because:
capital constraints limit investment velocity
talent shortages slow implementation
operational complexity increases with scale
regional nuances require different approaches
digital transformation requires specialized expertise
LouAnn Conner brings deep expertise in international business, operations, scaling, strategy, and corporate governance—specifically focused on helping SME leaders navigate the nuances of doing business across regions.
Strategic Scaling Framework: The data shows that 28% of scale-ups identify operational challenges as obstacles to growth, while 84% of executives say executing at the pace needed to win in the market is a challenge. Scaling isn't just about growing bigger—it's about building operations that can execute at the velocity your market demands. LouAnn works with CEOs to develop expansion strategies that account for regional operational realities, helping you sequence investments and build infrastructure that supports growth.
Regional Market Intelligence: 67% of US SMEs see trade policy and tariffs as the top hurdle to international expansion, but policy is just one variable. Understanding business culture, regulatory environments, and operational requirements in each target market prevents costly mistakes. Whether you're considering European expansion, eyeing Latin American opportunities, or exploring Asian markets, regional expertise is the difference between smooth entry and expensive learning curves.
Operational Excellence for Cash Flow and Efficiency: With SME lending down 9% and credit costs up 6%, operational efficiency isn't optional—it's survival. From cash flow optimization to process improvement to building management systems that can handle complexity, operational excellence becomes your competitive advantage when capital is expensive.
Governance and Risk Management: 65% of companies cite operational risk from transformation initiatives as a top priority. International operations introduce new governance requirements and risk profiles. Building proper corporate governance frameworks—from financial controls to compliance systems to board structures—protects your business while enabling confident expansion.
Navigating the Talent Challenge: 40% of scale-ups cite finding the right talent as their biggest challenge, with 34% struggling to reconcile salary expectations with liquidity constraints. This requires creative talent strategies that work across different labor markets, organizational structures that can scale, and cultures that attract people who will execute your vision—even when you can't match big company salaries.
Practical Digital Transformation: 39% cite lack of skilled digital talent as their biggest barrier to digitization. Technology should enable scaling, not complicate it. The work involves identifying which digital investments actually matter for your business model and markets, creating practical roadmaps that improve operations while supporting expansion goals—without requiring expertise you don't have.
Why Regional Expertise Matters for Your Growth
The research shows the challenges are universal—but the solutions are decidedly local. Nigerian MSMEs face 28.92% inflation and critical infrastructure gaps. European scale-ups struggle with regulatory complexity and customer acquisition. US SMEs navigate trade policy uncertainty. Each market presents unique operational realities.
LouAnn Conner has built expertise navigating these complexities—understanding what creates friction and what enables growth, knowing how to build operations that work across borders while respecting local constraints.
What's Your Next Move?
You have growth ambitions. You see opportunities in regional markets. You know your current operations need to evolve to support the business you're building.
The research confirms the challenges are real, interconnected, and not getting simpler. The question is whether you're building your scaling strategy with someone who understands international business operations, or whether you're learning expensive lessons through trial and error.
76% of executives say they have the capabilities to execute business model changes at scale, yet 84% say executing at the pace needed to win is a challenge. The gap between capability and execution is where strategy matters most.
Ready to build your scaling strategy with someone who understands international operations?
Connect with LouAnn Conner and SagaciousThink to discuss your expansion plans. The right strategic partner doesn't just help you avoid mistakes—they help you identify opportunities others miss and build operations that turn regional complexity into competitive advantage.
Sources
This analysis draws on recent research from:
World Bank/IFC MSME Finance Gap Report (2025)
OECD SME Financing Scoreboard (2025)
McKinsey Supply Chain Survey (2024)
Deloitte Scale-Ups Confidence Survey (2024)
Deloitte Smart Manufacturing Survey (2025)
PwC MSME Survey Nigeria (2024)
PwC Digital Trends in Operations Survey (2024)
DHL US Small Business Survey (2025)