Financing digitalization of SMEs
Digitalization has seen an enormous growth throughout all businesses and continuous investments are significant particularly for Small Medium Enterprises [SME] to optimize their processes and reduce costs to remain or grow competitive in today’s markets simply to advance or even survive in future.
Stephanie Heller, 2021
Bachelor Thesis, Comitas AG
Betreuende Dozierende: Daniel Gwerder
Keywords: Finance, Financing, Digitalization, Digitization, SME, Financial instruments, SME credit rating, Leverage effect
A Swiss IT company offering tailor-made software solutions to SMEs proposed a thesis to get more knowledge of their SME customers how they finance digitalization projects. The goal of this thesis is to demonstrate how SMEs approach, budget and in particular finance their digitization efforts. A parallel goal is to develop alternative solutions as a basis for decision-making on whether they should invest or further improve into their newly implemented business model offering complementary finance services.
The first part based on secondary data and information will discuss the theory. The more practice-oriented second part comprises methods to acquire primary data of SMEs using qualitative and quantitative surveys conducted via an online questionnaire and interviews with different stakeholders in this industry to get different perspectives around the topic. All information and data were anonymized for compliance reasons. The acquired primary and secondary research data were analyzed and findings condensed to develop appropriate recommendations.
The feedback of the questionnaire and interviews confirm the perception of the IT company that SMEs predominantly finance their digitalization efforts with internal cash and equity capital. This behavior is amazing since the internal financing of such projects in particular with equity reserves is the most expensive. Further, internal finance sources are mostly limited and can reduce the size and necessary speed for digitalization efforts. Digitalization projects are less tangible for finance providers than other investments and therefore more difficult for SMEs to obtain. This is a dilemma and it is therefore not a surprise that 79% of SMEs strongly welcome complementary finance advice and proposals. This is an opportunity for the IT company to complement its digitalization offerings. The thesis elaborates four possible alternative solutions to offer such complementary finance services with or without partners in cooperation. The recommendation to the IT company is to test all alternatives before selecting one or a combination of them to balance opportunities versus risks and adapt the their business model to obtain best practice improving sales success and profitable growth.
Studiengang: Business Administration International Management (Bachelor)
Fachbereich der Arbeit: Accounting, Banking, Controlling and Finance