Nearly every business has felt an impact from the recession. There has been no escaping. A few weeks ago, the word ‘recession’ were used in nearly every newspaper and online news… South Africa is in a technical recession. Nearly every day we as South Africans are inundated with negative news on both the economic and political front.
But there is nothing small business owners and entrepreneurs can do about this ‘bad news’. It is what it is! You have no choice but to adjust, cope, and survive.
Some small business owners believe they’ve seen the bottom and they are surviving — they are OK and they expect to persevere with modest adjustments. These small business owners are kidding themselves. The ‘bottom’ has not been reached, and it will be a long slide until it does. Whether you look at market indicators like the stock market, GDP growth, or whether you focus on the political turmoil and corruption, recession or not, this ‘recessionary-type’ market is, in my opinion, here to stay for a while longer.
So, what can you do?
Here are some tips:
- Defeat the downturn: During such times, it’s easy to panic. Panic, which is fear-driven and not based on fact but on emotion, has tremendous power, the power to change the direction of business. But do you want to give in to panic, throw your hands in the air and accept self-destruction, actually accelerating it, becoming a part of the panic, stimulating more? There’s an alternative to panicking. We are confronting change, and change is an opportunity for advances. Now you have the choice to take advantage of change it or allow yourself to be buried by it. Make the right choices today and see the results tomorrow. It’s not just about adjusting prices – you need to broadcast your differences, tell people why they should shop with you, provide them with added value, and not discounts, and watch your business grow in a down market. Be a leader, and the people will follow. As a small-business owner, you can help lead the way out of the recession. Start with your employees, move to your vendors, and then support your customers and your market area. Announce the good news, and everyone will line up.
- Evaluate and eliminate excessive debt. If your revenues have dropped, you may not be able to service the debt you took on when your revenues were much higher. Any debt can be worked out – secured debt, business loans, asset finance, trade finance, lines of credit, and even leases.
- Downsize. If you haven’t already, reduce your headcount and overhead. You can deliver the same amount – or more – by increasing productivity.
- Track your finances daily – and start today. Install a key indicator system to track your business and have daily, weekly and monthly financial reports issued. Follow profitability per job, per week, per client, per product, per service. Use these indicators to focus on your most profitable products or services. Cash generation is key.
- Reduce inventories and overhead at any cost. Look for items that does not move or turn frequently. That’s where your cash is locked up – in your cost of materials, labour, and so on, waiting to be turned into cash after it’s sold and the receivables collected. This can result in a huge cash drain.
- Train and cross-train your staff. If every job or task is learned by at least one additional person, when the primary person is out, the secondary person cross-trained to perform the task can leap in and save the day. And so, work continues, and productivity remains high despite the absence of a key player. Smoother production, greater productivity and happier customers mean a better bottom line.
- Resist profit-eating sales and discounting. Don’t give away your product; instead, compete with service, quality and uniqueness. Create a niche and have a competitive advantage.
- Manage effectively. This means tracking and analysing key indicators, financial reports and productivity. Get smaller first and more profitable; then grow slowly and carefully.
- Focus on quality. That’s what wins in the long run. Never forsake this principle. Get better, get smaller or be forced out. It’s your choice.
- Drop unprofitable customers. The natural urge is to hang onto every customer, but use the spare time the recession provides to analyse your customer base and find out which ones are the most profitable and which ones are costing you money.