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Many business owners are faced with the difficulty of having to successfully navigate their establishments through tough economic times.
The business owners who mostly feel the brunt of tough economic times are small and medium enterprises (SMEs). However, they have remained resilient.
Veroshen Naidoo, Regional Investment Manager at Business Partners says small business owners have had to remain brave through the sluggish GDP growth, fiscal constraints, and rising costs of most things, including electricity. Previously they had to weather the storm through persistent load-shedding.
“Survival strategies vary, but the solution to sustaining a business in times of economic volatility lies in maximising efficiency.”
He says during tough economic times, time and money are two commodities that become scarce for business owners. The challenge is therefore for SMEs to find ways to reduce waste, make the most of any available resources and boost the business functions that produce the highest return on investment.
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Naidoo says it is normal for businesses to start incurring extra expenses as they start to grow and evolve. And these are the expenses that were not part of the financial outflow during the first years of the business.
“Some of these expenses could include subscription costs on software packages and tools, upgraded machinery and equipment, marketing costs, additional professional services such as consultants and legal advisers, and licensing fees.”
He believes some of the expenses might be important for the day-to-day running of the company, however, it is also important for the owner to closely monitor these. Cut the unnecessary ones to relieve the burden off the cash flow.
“If left unchecked, these hidden costs are like leaks in your ship that cause revenue to slip away unnoticed. Becoming more efficient means plugging these leaks by cutting costs – even if just as a temporary measure, until stability returns.”
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During difficult times for the business, employees are often pushed to their limits and are expected to go above and beyond. Naidoo explains that this could have a negative impact on the business in the long run.
Having employees increase their efforts could result in greater levels of absenteeism, low staff morale, reduced productivity and increased human error.
“Ultimately, these factors will cut into your profitability over time and decrease how efficiently your business is making use of valuable human capital,” he says.
Naidoo adds that the most effective measure to keep a company going through tough times is to implement flexible scheduling to meet employee needs, while the business runs. He does not believe in retrenching people or reducing wages.
He says it is important for every business, small or big to invest in its employees. “SMEs could also look into upskilling programmes that train employees on how to handle multiple tasks or roles within the business.”
He advises owners to look for available government-sponsored training programs that can benefit their businesses and employees. Cross-training enhances flexibility, reduces reliance on specific individuals, and enables smoother workflow transitions during periods of high demand or staff shortages.
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The last key that he believes can help businesses navigate through tough times is to evaluate the efficiency of processes. “For example, if the SME’s raw material ordering system is not optimised, it could lead to materials expiring.”
Reviewing processes can reduce waste and make sure that the guidelines put in place can account for everything that a business needs to survive.
“You could start by documenting existing processes to gain a clear understanding of how tasks are currently being performed. Use flowcharts or diagrams to visualise workflows and identify potential areas for improvement.”
He reminds the SMEs to never compromise on quality. Quality is often the key that differentiates businesses in the same market and good quality will ensure that your business survives.
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