The Next Phase for Greece’s Economic Backbone: Empowering Small and Medium Enterprises
Small and medium-sized enterprises (SMEs) form the backbone of Greece’s economy, making up 99.9% of all businesses and employing more than 83% of the workforce. These companies drive job creation and sustain local economies, yet many face persistent challenges limiting their growth and competitiveness potential. Despite their essential role in the national economy, Greek SMEs struggle with issues ranging from limited access to financing and rising operating costs to skill shortages and digitalization gaps. In this blog, we explore the current state of Greek SMEs, their obstacles, and potential solutions to help these businesses thrive.
Structural challenges and fragmented leadership
Many SMEs in Greece are owner-operated, and while this model provides strong hands-on leadership, it often limits the business’s ability to grow. Most of these businesses are focused on survival rather than expansion, with decision-making centered on immediate needs rather than long-term strategies. Without professional management or succession planning, these SMEs lack the direction necessary for innovation and scaling. The fragmented leadership within many of these companies means they are slow to adopt new technologies, invest in growth strategies, or explore new markets.
This conservative approach, where owners prefer to keep operations small and manageable, often stems from limited resources and experience in scaling businesses. As a result, Greek SMEs still need to be more utilized, missing key opportunities for expansion and efficiency. Their focus on day-to-day operations rather than strategic growth keeps them stuck, unable to compete on a larger stage or innovate effectively.
Limited access to financing and liquidity constraints
One of the biggest hurdles facing Greek SMEs is a lack of access to financing. Over half of these businesses experience liquidity challenges, with little or no cash reserves to cover more than a month’s worth of expenses. Access to external financing, whether through traditional bank loans or alternative credit sources, is often limited, forcing many businesses to rely heavily on internal funding. This situation hinders their ability to invest in growth, upgrade equipment, adopt new technologies, or train their workforce. The reliance on internal capital leaves these businesses vulnerable to market shocks and unable to seize opportunities when they arise.
Rising operating costs and squeezed profit margins
In recent years, Greek SMEs have faced significant increases in operating costs, largely driven by inflation, rising energy prices, and higher raw material costs. Between 2021 and 2023, operating costs for SMEs surged by approximately 35%, putting immense pressure on already thin profit margins. Many businesses are unable to pass these rising costs on to consumers, resulting in reduced profitability and less capital available for reinvestment.
This financial squeeze leaves SMEs with few options. Without the ability to reinvest in their operations, these businesses are unable to upgrade equipment, introduce new products, or implement innovative solutions. The result is a cycle of stagnation, where Greek SMEs remain stuck at a level of output that hinders their ability to compete effectively in both domestic and international markets.
The digital divide and skill shortages
One of the most significant barriers to growth for Greek SMEs is their slow adoption of digital technologies. While digital transformation is driving growth for businesses across Europe, Greek SMEs lag behind, with only 39% of them achieving basic digitalization compared to the EU average of 55%. This lack of digital tools limits their operational efficiency, reduces their ability to serve customers online, and restricts their market reach.
Moreover, a shortage of skilled labor further compounds this issue. Many SMEs struggle to find employees with the digital and technical expertise needed to manage and implement digital solutions. In many cases, SMEs are also unable to invest in training that could help upskill their workforce, leaving them less competitive in an increasingly digital marketplace.
Resistance to innovation and growth
The conservative nature of many business owners, particularly those who are entrepreneurs out of necessity rather than opportunity, leads to hesitation in adopting new technologies or exploring new markets. For these business owners, the risks associated with change often outweigh the potential rewards, leading to missed opportunities for expansion and increased market competitiveness.
This resistance to change is exacerbated by a lack of access to strategic guidance. Without expert advice or mentorship, many SMEs lack the confidence and knowledge required to implement digital tools or pursue new growth strategies. As a result, these businesses remain small, missing the chance to grow and transform in ways that could significantly enhance their operations and profitability.
Market landscape and growth opportunities
Despite the many challenges they face, Greek SMEs play a vital role in the economy, contributing 57% of the total added value and generating approximately €34.8 billion annually.
The SME landscape in Greece is dominated by micro-enterprises, with 94.5% of them employing fewer than 10 people. These businesses are concentrated in sectors such as wholesale and retail trade, professional services, hospitality, construction, and transportation.
In recent years, certain sectors, particularly construction, have shown impressive growth. Between 2022 and 2023, the construction sector saw a remarkable 17.09% increase in turnover, signaling potential for future expansion. Furthermore, around 40% of Greek SMEs already engage in international trade, with sectors like food and beverage, agriculture, and tourism showing strong potential for export-driven growth. These pockets of success highlight the potential for SMEs to grow, provided they can overcome their current limitations.
The path forward
For Greek SMEs to overcome the challenges they face, the solution lies not just in tackling individual problems like liquidity or digitalization, but in a more comprehensive approach. Market consolidation, coupled with employee ownership, can transform the fragmented SME landscape into a more cohesive, efficient, and competitive force within the economy. This approach addresses the underlying structural weaknesses in SMEs while empowering employees to become true stakeholders in the success of the business.
1. Market consolidation is essential for Greek SMEs because their fragmented nature limits their ability to achieve economies of scale, reduce costs, and compete effectively. With so many businesses remaining small and owner-operated, they often operate in isolation, missing out on opportunities for collaboration, resource-sharing, and optimized procurement. Consolidating these SMEs into larger, more robust entities allows for several key advantages that directly address the core issues plaguing the sector.
- Achieving economies of scale
- Enhancing operational efficiency
- Strengthening market position
- Attracting investment and financing
2. Employee ownership adds another powerful element to the equation — employee engagement and motivation. The traditional SME structure in Greece, where ownership and decision-making are tightly held by a small group or a single owner, often leads to a lack of long-term employee commitment. By contrast, offering employees a stake in the business through ownership plans radically shifts the dynamic, creating a more motivated and dedicated workforce.
- Aligning employee interests with business success
- Improving retention and attracting talent
- Enhancing group culture and collaboration
- Incentivizing long-term growth
By combining market consolidation with employee ownership, Greek SMEs can overcome many of the challenges they face and create a more robust, competitive environment for growth. Consolidation addresses the inefficiencies and fragmentation that currently hinder SMEs, allowing them to scale, reduce costs, and strengthen their market positions. Meanwhile, employee ownership builds a more motivated, engaged, and innovative workforce that is committed to the long-term success of the business.
This hybrid approach creates a virtuous cycle: as consolidated SMEs grow stronger and more competitive, employees — who now have a vested interest in the company — are motivated to drive that growth further. Together, market consolidation and employee ownership lay the foundation for a new era of SME growth in Greece, empowering these businesses to play an even greater role in the national and global economy.
Empowering SMEs for the Future
Greek SMEs are at a critical juncture. While they face significant challenges, there are also clear growth opportunities. By adopting a hybrid model that addresses their structural, financial, and operational challenges, SMEs can unlock new potential and contribute even more to the national economy.
The future of Greek SMEs depends on their ability to embrace change, invest in digital tools, and leverage strategic support to grow. With the right resources and mindset, these businesses can overcome their limitations, scale effectively, and compete in both domestic and international markets. As they do so, they will continue to be the backbone of Greece’s economy, driving job creation, innovation, and sustainable growth.
The initial thought behind this blog was to empower everyday readers to understand and stay informed about the technology shaping our world. In Discovery Series, my main priority is to demystify complex technology concepts and showcase the creativity and innovation happening in the startup world.
