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Cape Town - Business owners face a nerve-wracking time as economic and political crises continue to create a perfect storm fuelled by a weak rand, high labour costs and rising inflation.
However, with some planning they can batten down the hatches and ride out the storm with their books firmly in the black, according to Jannie Rossouw, head of Sanlam Business Market.
He outlined seven points for businesses to take into account:
1. Separate your business ‘must haves’ from your ‘nice to haves’
“This might sound obvious, but it is worth thinking carefully about where you cut costs in tough times and where you keep spending.”
He said many businesses, for instance, quickly cut their marketing spend, but this could be a mistake.
“If yours is the one business that is still very visible through your current marketing spend, it can be a huge competitive advantage,” said Rossouw.
He noted that spending on ‘must haves’ should include the assets needed to produce value, product, service and innovation, research and development, customer service training and staffing, as well as upskilling of employees.
“These are all areas which allow your business to evolve and grow.”
On the other hand, some of the following could be considered ‘nice to haves’ in the current economic climate: replacing vehicles, IT equipment, updating branding, and upgrading mobile phones.
“A good tip is ‘zero-base budgeting’ – starting a budget from scratch will really allow you to scrutinise and minimise costs.”
2. Cash is king
“In tough economic times, your pricing strategy is everything. And cash, as always, beats terms. So consider offering your clients discounts for cash – but don’t discount for the sake of it, do this only as part of a carefully considered pricing strategy.”
He said discounting for bulk purchases is also a good strategy to consider.
3. Get tough on credit sales
For credit sales, businesses will need to implement a stringent policy to ensure that customers can service their debt.
“It can be tempting to loosen up a bit on credit granting to make your sales figures look good – but a sale is not a sale until the money is paid, so make sure your clients are good for it!”
4. Optimise the processes in your business
Rossouw said running the tightest ship possible is really critical to trading in the ‘storm’.
“Spend time identifying any inefficiencies in the business and working out systems and processes to streamline these. Here, researching international best practices, working with specialists and networking with other business owners can offer invaluable insights.”
5. Technology is your friend
There are so many ways that technology can make your business more visible, more efficient, more modern and more attractive, said Rossouw.
“Don’t be afraid to embrace the change that good use of technology can make in your business. Keep your eyes open for advancements which will lead to your own advancement.”
6. Upsell to your existing clients
It is cheaper and easier to sell to your existing clients than it is to attract new ones, said Rossouw.
“By gaining a deep understanding of your clients’ wants and needs, you can tailor products and solutions to these and increase their spend with you in the process.”
7. Manage bad debt proactively
Rather than getting a big fright when clients don’t pay you, factor bad debt into your business as a potential risk and plan for it, advised Rossouw. “Chase up on unpaid bills early and offer payment terms to help clients settle debt when necessary.”
