The seven (7) steps to staying relevant in a challenging economy as an SME

The world is becoming an increasingly difficult place to live and do business in. Global events continuously point to the increased state of insecurity of life and property the world over. Who could forget the scenes of large numbers of refugees fleeing war torn Syria for Europe, at great risk to their lives? The activities of international terrorist groups have made the world a less than safe place for everyone; whether rich, poor, religious or non-religious. Added to this, international economic trends do not look very pleasing. Fresh out of the global financial downturn of 2007 and 2008, posed by most economists as the worst financial crisis since the great depression in 1930, the world is experiencing economic fluctuations on different levels. The crisis played a significant role in the failure of key businesses, decline in consumer wealth estimated in trillions of U.S. dollars, a downturn in economic activity and the European sovereign-debt crisis.

Locally, Nigeria has perhaps gotten more than its fair share of the insecurity and the economic instability. Nigeria continues to grapple with insecurity brought about by the activities of terrorist groups, armed robbery and kidnapping gangs, as well as other politically induced hardships. Nigeria’s economic performance over the past year has also been a major source for concern. The Nigerian economy expanded 3.96 percent year-on-year in the first three months of 2015, the lowest growth since the last quarter of 2012. It was the third straight quarter of slowdown as lower oil prices and supply constraints dragged the oil sector down. Many other economic indices have experienced a downward trend in the past year. To forestall this, the Muhammadu Buhari administration has promised a range of cost cutting and belt tightening measures that might inflict further hardship on business owners in the short term at least. It will not be surprising if the much-debated subsidy on petroleum products is finally removed in the next one year. The result of this might be beneficial or harmful depending on which expert one listens to, and which side of the political divide one is more inclined to.

In the face of all this, Nigerians still have to go through everyday life and find ways to survive. Business owners will need to continue to find ways to make profit by providing some sort of value to their customers. Even in the harshest of conditions, there are still individuals with the skill and resilience to identify business opportunities and expend time, energy and resources towards making sure that these ideas come to fruition. While the challenges may be many, there are still equally more opportunities to be tapped into at this point in time. We live in a period where the world is more connected than ever before. New business ideas and opportunities are springing up every day. Paradigms are changing quickly. Those who are bold enough to make the right decisions at the right times are reaping bountifully from their business ventures. With these two simultaneously existing trends, SME owners need a guide to exploit the opportunities while avoiding the pitfalls.

Below are the critical seven steps SME’s can adopt to achieve this.

Managing Cash Flow

The prevailing state of low cash flow in the economy simply means that businesses are going to have to look for creative ways to reduce costs. The traditional solution to this would be to retrench staff to reduce overhead costs, but there are other measures that can be taken to prevent losing talent that a company may have spent time, energy and resources grooming. Cost cutting might be a better alternative. This can be done by critically assessing what the company truly needs and what it can do without. Does the SME really need an office? Are its staff better off working from home to lower the cost of commuting? Can the SME share a working space with another company?

Technology

Another cost cutting measure would be to reduce the time and resources spent attending meetings. Technology has provided SMEs with a smart means of having real-time communication with potential partners without having to physically be in the same place. There is now a reduced need for expensive trips to other states or countries just to have meetings that can be done online. Another cost cutting measure would be to invest in getting the best out of the employees in the organizations. Training and mentoring can help existing staff to gain more skills and take on more responsibilities, thereby saving the stress and cost of finding new people to take up individual roles that can be combined. Cutting cost can be an enormous inconvenience, especially in a company that has grown accustomed to waste. However it is something that must be done in these times. Care must however be taken to ensure that cost cutting does not become a problem in itself. Priorities must be given to the aspects of the business that are profitable, and capitalizing on them.

Investing

A much bolder alternative to cost cutting would be increasing investment. Though this seems risky, it could be the best solution if managed properly. Infusing more funds to your business in times of economic upheaval could allow an SME seize a higher share of the market while the competition is trying to play safe. Funds for investment can be procured through loans, grants and financial assistance, as well as by seeking support from investors who might want to acquire some equity in the business.

Customer Service

In times of economic downturn, SMEs providing similar goods and services will be competing for the dwindling disposable income available to customers. Those who succeed will be those who can employ the most creative means in attracting the attention of the target market. Indeed, the most successful SMEs will be those who take time to get to know their customers and understand exactly what they want from them. Customer service is very important in fostering relationships and getting customers to always come back. Marketing skills are also very important in this fast moving world. While traditional advertising might be expensive, it still has its positive side. Companies should not sting on their advertising budgets in difficult times. In fact, some experts believe that periods of economic difficulty are the best times to increase advertising. Social media is also becoming the platform for engagement between companies and their customers. Any forward thinking SME that isn’t on at least one of the numerous social media platforms such as Facebook, Twitter and Instagram is missing out on an opportunity to reach out to its customers.

Business Intelligence

From a strategic point of view, taking a business through tough times requires up to date business intelligence. Businesses have to be flexible in how they perceive themselves and the type of products and services they offer. An adjustment of the company’s business plan might be necessary. The company’s Unique Selling Proposition should be redefined if it doesn’t fit in with current realities. SME owners should not see this as a failure on their part but as a means of repositioning themselves for greater achievement. SME owners should also keep abreast of local and international events and be quick to recognize how these events can affect their businesses. This will help in preparing them to take advantage of some of these policy changes to their own benefit. The modern day SME owner should always have his ear to the ground and have current news at his fingertips.

Global Outlook

On a more global level, SME owners need to recognize the important role they play in the Nigerian economy. They should also note that individual companies have no power to influence the policy changes that can provide them a lifeline. SMEs within the same industry need to come together to form pressure groups to present their case to government on specific issues that affect them. This type of lobbying and government engagement can produce gains such as reductions in taxes, tariffs and import duties. Governments recognize that SMEs are the lifeblood of any economy and any progressive government would be willing to make certain sacrifices to ensure that SMEs within certain sensitive sectors do not go out of business due to harsh economic conditions.

Re-invent

The most important point to note in all this is that in today’s economy, there are possibly harder times ahead; but there will always be opportunities for businesses to grow even amidst all the uncertainty. The ability of SMEs to thrive in a harsh economic environment is totally dependent on their ability to re-invent themselves and innovate in ways that will position them to take advantage of the opportunities that still exist.

Finally, the survival of SMEs within specific industries will be largely dependent on their ability to come together to engage the government to ensure that they are being considered when economic decisions are being made. Therefore, it is not only what SMEs do as individual companies that will help them to survive, but also what they do as a group.

MUNA ONUZO