Ten essential survival strategies for SMEs in 2020
INTERNATIONAL - A new year, and more importantly a new decade, provides an opportunity to re-evaluate what’s working and what’s not and to draw up a game plan for the next 12 months.
This is no truer than for an SME in South Africa.
Having been through a very challenging 2019 - thanks to a multitude of hard knocks including a low-growth economy, expensive and unreliable utilities – Eskom is a current case in point - and an over-indebted consumer who has pulled back on buying – entrepreneurs have found themselves in trouble, with only 10 percent of small businesses making it through these tough times. This is according to the Retail Capital Roll With The Punches Report. The other 90 percent are foundering. So while they are often considered the solution to our economic and unemployment problems, it is they who are in need of a lifeline.
To overcome this, SMEs need to work smart and make some changes; let’s face it, it’s not business as usual. Here, Karl Westvig, Chief Executive of Retail Capital, an alternative SME funder, advises entrepreneurs on what they can do to move from panic to profit.
1. Speed up cash flow and your inflows by having arrangements with bigger clients. If you have corporates or bigger companies on your book, ask for preferential payment terms and convince them into supporting you as an SME as it is really their responsibility to assist.
2. Protect cash flow. If you can reduce expenses and look at your overheads, don’t get caught in the trap of a few consecutive months of overspending which could become the norm.
3. Build a data bank – this is a valuable asset for you as it opens up new channels of funding. One of the biggest constraints for SMEs is funding. By consequence, if funders have data that is reliable and gives a track record of how the company operates – trading patterns, turnover levels, card vs. cash – this information can be leveraged to gain access to funding.
4. Know your funders – it is up to you to position your business in a way that speaks to the funders’ requirements. Importantly, there are also different funders for different stages of the business’s life cycle.
5. Get involved with an entrepreneurial community that is on the same journey as you, but that is not necessarily at the same level: find one that exposes you to more mature businesses and from whom you can learn.
6. If you have a bad business model or it isn’t working, change direction. There is no straight curve, and it’s important that business owners understand that.
7. A tough market provides the opportunity to re-evaluate what matters to you as a business owner and your clients. You need to understand what’s most important to ensure that what you are offering stays relevant.
8. Embrace digital. So many businesses hear about social media, TripAdvisor etc. but don’t know where to start. More and more people are buying online and doing comparisons so the more you embrace the opportunities that these online channels present, the better. There are plenty of tools available online, you just need to do some digging.
9. Having a positive attitude is essential. See the opportunity among the challenges and look for those gaps. You also need perspective: when you face a challenge and rising costs, tighter margins and lower demand, etc. it can all be seen as an existential threat and you might want to put your head in the sand. Or you can process it and take it up as a challenge.
10. Start learning to be a nice person. Happiness is a choice and success is a choice. And the biggest springboard to happiness is gratitude. The number one reason people will do business with you is if you’re a nice person, are grateful, forgiving, etc.
“There is no doubt that this is one of the most brutal operating environments that we have experienced in a long time, and which is significantly affecting our SMEs’ ability to trade, grow, employ and contribute to the economy.
"While I appreciate how hard it is, entrepreneurs need to see through the curve: what happens now doesn’t mean it will happen in six months’ time. Stay the course and dig deep, there are no shortcuts. It’s going to be tough but put in the time and ride it out until you come through on the other side," concluded Westvig.
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