OPINION: What 2020 have in store for the SA SME sector
Opinion / 9 January 2020, 6:30pm / Kumaran Padayachee
DURBAN - Whatever your outlook for 2020 may be, there is indeed light at the end of the tunnel.
This light is either a train light or sunlight. The light that you see is that which you choose - i.e. it is largely dependent on your perspective or lens. You can choose to only see things in a positive light, which may lead to disappointment, or you may choose to only see things in a negative light, which means living in constant fear and anxiety. The best way forward is to find the middle road between positive and negative perspectives and to use this as your guiding light in the year ahead.
When we look at the SME sector, we must recognise that it is a paradox. It’s both good and bad at the same time. Some companies thrive, while others die. Some people survive by cutting costs where they can, while others double down and focus on growing their revenues. Much like the paradox of the SME space, your philosophy must be paradoxical in order to balance your thinking, to create a clearing in the entrepreneurial jungle, to forge through, and continue to grow.
So what does 2020 have in store for us?
How will the SA economy affect SMEs?
Generally, the macro-economy is not as important to SMEs as it is to bigger companies. What matters is the strength of your business model and ability to respond quickly to opportunities.
For example, we’ve seen some large companies close their doors in the past couple of years. But, as in any jungle, when big trees fall, it leaves space for the smaller ones to grow. Even in sectors which are under pressure - like construction - we’re seeing smaller operators thriving, as there is still a demand for servicing in this sector.
Another example is the fuel wholesale market, which is dominated by big players and margins that are thin. In spite of this, smaller independent fuel wholesalers are adapting in a smart way by actioning a location-based strategy: they’re taking fuel into smaller towns and servicing niche markets - finding a unique gap in a highly commoditised market.
The word of caution here is for SMEs to avoid becoming over-exposed to a particular sector - or worse, a single client. If that ship sinks, it may just take you down with it. That’s why it’s important to recognise risk and to manage it. Insuring your debtor’s book, for example, may seem like a small task but it goes a long way in terms of mitigating risk.
Should SA’s SMEs care about global conditions?
Yes, but only on the periphery. Don’t try and control or lose sleep about that which you cannot control. It’s all good and well to be aware of what’s going on in the world and to see if it creates any opportunities for your business. But generally, focus on what you can control.
So what do we need to do to get ready for 2020?
Once the mayhem of year-end dies down, it’s always a good idea to take some time to reflect on the year that passed. Where did you go right? What could you have done better? Remember, growth is about revenue – and revenue is about strategy, sales, and marketing. In your sector, what are the distressed areas - how can you take advantage of them? Look for three things you can do, and put some plans and budgets behind those. At the same time, identify the three red flags in your sector, and think about how you would adapt to those.
Funding – it’s not going to get any easier
We all know that funding is getting harder to acquire. The whole sector is tightening, and funders are being more cautious than ever. Our advice is simple: be alive to this reality, and plan for your funding needs early, as it’s going to take you longer to get funding. Also, manage your expectations. It’s not going to be easy, but the funding is there – in abundance - and you must be 100 percent prepared and on top of your game for when those opportunities arise. Combine all of these factors and 2020 should turn out to be a fantastic year, with plenty of sunlight ahead for you and your business.
Kumaran Padayachee, Chief Executive of Spartan SME Finance