Lester Smith, CEO of Distinct Solutions, winner of the BPeSA emerging, Outsourced Training Provider of the Year 2009, shares seven lessons on how SMEs can prosper, recession or no recession.
There are clear signs that the global economy is in a deep recession. As small business owners, we are all feeling the economic crunch and as result must take action to survive.
Financial Control and Prudence, Review your business plan model and leadership
1. Financial prudence is important. Review your business expenses on a daily basis and reduce your costs where possible. Perform an analysis to determine the ability of your company to adjust to the economic climate. This involves a review of the cost structure, debt leverage and retained earnings.
2. Instead of retrenching people offer them a drop in salary. It is better for the moral of your staff and you don’t have to pay a retrenchment package.
3. Offer workers a shorter work week. Three days instead of five days a week or a half day instead of full day.
4. Cut perks and reduce overtime. Be open with your employees and explain to them why you need to do this.
5. We may be heading for tough economic times and, no doubt, some companies will not survive the squall. However, there are many examples of companies that have escaped disaster through transformational and visionary leadership.
Focus on quality/best practise
1. In a financial crisis the one thing that needs to be maintained is quality. Find out what the standards for your industry are, if you need to be ISO accredited make sure you are. Quality standards give potential investors a benchmark and ensure you business is viewed as credible.
2. As this area is constantly being tweaked it is important to not rest on ones laurels, look at other successful companies and see what they are doing, if that knowledge is not available locally look abroad to other markets.
Opportunity to invest in training – People, Service, Profits
1. Your staff confidence is already shaken, this presents unique window of opportunity to focus on your people. Training goes hand in hand with quality; if you don’t have the resources to manage this internally look to outsource this sector of your business. South Africa is a respected international call centre destination because of the quality of our staff, as soon as you take that away, you will lose business to cheaper destinations like India and the Philippines. If anything during a recession, more money should be spent on training resulting in increased staff productivity. People, Service then Profits.
Focus more on your customer and clients, Sales and Marketing
1. Your clients should be more than just the people paying your bills. To ensure long term sustainability you need to develop a two way relationship. Learn from them, understand their business and use that knowledge to help improve your own business.
2. Focus on providing superior customer service.
3. Keeping your existing customers is a critical objective during a recession. Offer aggressive sales and discounts to your customers in order to encourage customer loyalty.
4. It’s critical not to cut these cost, keep advertising though. You may actually increase your market share, as many other businesses are not advertising. However monitor spending carefully to see what works and eliminate what doesn’t.
Leverage of expertise
1. Starting a business is a difficult process regardless of the financial climate. For this reason it is important to be patient and to take advantage of the expertise available to you. One must never underestimate the value of experience. Be patient, learn from your peers and where required bring them onboard. You may be a world leader in operations, but lack basic strategic skills, if you don’t have the required skills you are setting yourself up for failure.
Partner/Joint ventures
1. Companies may need to form a strategic alliance or joint venture to allow reorganization without a substantial reinvestment of funds. Partner with organisations relevant to your business. Work together with companies that offer products complimentary to yours. A lot of small start-up companies have great concepts, but lack the resources to turn an idea into a successful venture, by partnering with larger more established business you will be able to compete in markets you may otherwise have not been able to.
2. Governing bodies are another great avenue in helping grow your business. I work closely with BPeSA Western Cape who assist SMEs in the call centre space. Find out who your governing body is and how they can help you. These organisations are often extremely busy, so to ensure you get full value from them, it is important that you develop a strong working relationship, don’t expect them to do everything for you.
Analyse and Diversify
1. Make brainstorming a part of your daily routine. Force yourself to be innovative; sometimes brilliant opportunities come disguised as impossible situations.
2. Conduct regular audits, be willing to adapt, if there is a need in the market ask yourself how I can service it. Once you have analysed the market look at diversifying, avoiding putting all your eggs in one basket.
All these points are fundamental to your company’s success. By integrating each of these seven areas, recession or no recession your company will prosper. In times of economic uncertainty, your preparation and strength of will are genuine assets.
