Thriving in a difficult economy is were most startups would like to be. But this hasn’t been easy for many SMEs and by all accounts the tough economic climate is expected to continue.
According to The Institute of Race Relations‘ National Growth Strategy, the most optimistic forecasts for the next three years put economic growth at less than 2% of GDP and key indicators of business, investor, and consumer confidence are at deep lows.
Take advantage of the positive and brace against the negative
For many business owners, the situation may seem very discouraging, however, seasoned business leaders are advising entrepreneurs to find ways to take advantage of the situation.
Jenny Retief, the first CEO of the Riversands Incubation Hub, an initiative aimed at sparking economic growth and providing support for small business owners, echoes this sentiment. She says entrepreneurs should challenge accepted thinking and look for new opportunities outside ‘business as usual’ markets.
Retief also says it is important for entrepreneurs to be on the ‘numbers watch’, read the signals and have the ability to respond to the tough economic landscape.
“In other words, if you were doing what you have always done and the numbers are not where they should be this is an indicator that your market is compromised and you need to start innovating. Great entrepreneurs also have the financial discipline to build cash reserves when times are good.”
In addition, Retief says, the tough economic climate calls for entrepreneurs to be more cautious in their decision making and in conducting their market research.
“The market you are considering should be strong and growing to be recession-resistant should the economic climate shift. The services and products being delivered must be packaged as ‘must haves’ and not ‘nice to haves’. Finding out what is valued by customers and then describing this value in a way that resonates with customers is critical. This is where market research is invaluable,” she says.
Retief, who is one of the featured speakers at the SME South Africa Growth Champions Seminar, shares a few survival strategies that small business owners can implement during these tough times, which will ensure that their businesses grow in spite of the economy.
Refine your offering carefully – You need to define and redefine your offering in response to customer needs – all while keeping income coming in. What do you offer? What makes you different? And what does the market want? This will involve understanding how competitors in your market operate, as well as spending time with customers to better understand what they want.
Then, don’t just think about it, commit this to paper. Write down your offering or get some help from an expert copywriter to define what makes your company special. This groundwork is critical as the messaging around your offering will be used in your marketing material and website, influence your corporate identity and influence how you interact with customers.
Eliminate bad payers soonest – Cash flow is the lifeblood of any small business. It is important to spot bad payers early, take deposits and process payments for larger projects.
Poor payers drain resources and energy and keep you away from companies and people who really appreciate your offering. In general, keeping a tight handle on finances and not letting overheads tick up too much is key to your success.
Don’t put all your eggs in one basket – You need to constantly diversify your customer base. Depending on one or two large customers can be very dangerous; should they move their business you may also be out of business.
This means always keeping the sales pipeline busy and being responsive to new opportunities and new customers. Large customers can be a blessing and a curse: a blessing because they provide the volume and regular business but a curse in that they may take more resources to service than they’re worth.
Build a business, not a self-employed job – For a long time, you will be accountable for every aspect of your business, but it is nevertheless important to have the mindset of building a business, rather than having a self-employed job. If you are looking for aggressive growth, you have to lay the foundations to enable the company to run itself on a much larger scale without you being involved in every aspect.
This will mean spending time embedding systems, setting up clear reporting systems and focussing on developing people to execute to your specifications. This doesn’t mean that you can sit on the side-lines; you can still expect to work incredibly hard.
Catch Retief at the SME South Africa Growth Champion Seminar taking place in Midrand on 9 June. To be part of the event click here.