SME Enterprises struggle with rising costs and stagnant profit growth

Running a small or medium-sized business (SME) has never been easy, but the past year has made it even harder. All across the Netherlands, many entrepreneurs are feeling the pressure. Costs keep rising, especially wages, while profits barely increase.

A recent study by the Dutch Professional Organization of Accountants shows that most SMEs, despite extra effort and investment, saw only a slight rise in turnover and profit. For many, it feels like they are working harder just to stay in the same place.

Some sectors, such as healthcare and automotive, are still growing, but others, including hospitality and construction, are struggling. The challenges are significant, but there are also ways to adapt.

Barriers to profit growth for small enterprises

In the Netherlands, many SMEs see their profits remain flat, even when turnover increases. According to the SRA report, turnover rose by only 3.4% last year, while profit increased by just 3.1%. Costs, on the other hand, rose by 7.9%, leaving little left to reinvest.

Construction and hospitality companies, in particular, are facing problems. Entering new markets or expanding services costs a lot of money, and many businesses are already struggling to cover basic needs, let alone grow. Smaller enterprises with low margins also have limited access to loans. Without additional capital, there is little room to test new services, improve equipment, or reach customers more effectively.

Even when production increases, as in parts of the manufacturing industry, it often does not lead to higher profits. Wage increases and more expensive suppliers cancel out the gains. Entrepreneurs thus become trapped in a vicious cycle where they constantly work to keep up but cannot make progress.

Lessons from large enterprises in different sectors

By looking at larger companies in the Netherlands, SMEs can find ways to keep operating under pressure. One example comes from the gambling industry, particularly online casino platforms, which show how to remain competitive by constantly innovating and offering choice. They regularly add new and improved games, expand payment methods, and keep the service attractive to retain users and attract new customers.

Another example is large Dutch food retailers. They introduced more digital ordering options, offered loyalty features, and secured better contracts with suppliers to improve margins. These companies combat cost increases with innovation and gradual scaling while maintaining their profit levels.

Both examples show a pattern: by renewing their offering, making payments flexible, and steadily adding value, companies can maintain their position, even as costs rise. SMEs in the Netherlands can apply similar tactics and remain competitive through small but steady improvements.

Emerging opportunities for forward-thinking SMEs

Despite financial pressure, some Dutch SMEs are managing to grow through smart investments and entering new markets. In 2024, employment at SMEs rose slightly by 0.9%, and micro- and medium-sized companies saw a small increase in actual output.

Although this progress may seem modest, it shows that some companies are indeed finding ways to move forward. A good example is the so-called ;scalers’ – SMEs that grow their turnover or workforce by at least 10% annually over three years.

Between 2017 and 2020, these companies made up about 22% of all non-financial SMEs. Together, they generated over €100bn in additional turnover during that period, representing a significant share of the total SME market. This growth is often the result of strategic adjustments.

Practical strategies for cost control and growth

To tackle rising costs and retain some profit, many Dutch SMEs resort to small but effective strategies. One of the most common measures is renegotiating supplier contracts.

Companies seek better terms for long-term agreements or join forces with other enterprises to gain more bargaining power. Shared logistics and collective purchasing arrangements are becoming increasingly common, helping to reduce fixed transport and supply costs.

Administrative processes are another area of focus. SMEs that switch to digital systems for invoicing, payroll and appointment planning often report savings in time and cost. It reduces human error and saves hours of paperwork.

Working on structural resilience

For Dutch SMEs, working on structural resilience means looking beyond short-term survival and striving for stability despite rising costs. An effective approach is forming partnerships with other local businesses. By sharing services, companies can lower fixed costs and operate more efficiently without large upfront investments.

Another strategy is joint investment in sustainable resources or equipment. When several small companies pool their resources, they gain access to better technology while keeping individual costs manageable.

Companies that focus on cost sharing, joint purchasing and collective innovation are often better able to withstand income fluctuations and price increases. Such collaborations allow them to grow more steadily and protect themselves against unpredictable developments in the market.