The recent decision by the South African Reserve Bank (SARB) to increase the interest rate to 6.25% will impact every sector of the economy, notably SMEs - many of which may not have the same stabilising infrastructure and contacts as bigger enterprises.
It is, however, possible for small and medium businesses to survive this economic challenge with careful planning and smart business decisions. The following advice could ensure that your SME maintains – or even boosts – its profits and customer base:
Limit your spending:
It’s common to underestimate the costs of buying, opening and maintaining another store or business, but in a weak economy this can be fatal. Rather focus on improving your current business to attract more customers.
Don’t skimp on marketing:
Try to become more visible to your consumer base, especially existing customers – success in this area could see you through a downturn.
Get the basics right:
All successful business owners have good financial management systems in place to keep up with invoicing, debtors and creditors, stock turnover, targets etc.
Sell unproductive assets:
If you have any assets that are not making money, consider selling them for cash or leasing them, and then use the money to increase productivity.
Plan your future:
A plan for future maintenance and growth is a great idea, especially if it includes thorough cash-flow forecasts that are regularly updated and studied, depending on prevailing economic conditions.
Though challenging economic periods naturally come and go, SMEs can modify and streamline their processes to make them more cost-effective.