Sunday, September 16, 2012

SMEs - a good time or bad

SMEs with poor management and ownership are going to disappear, particularly those in overtraded industries with low barriers to entry. But this is a blessing, particularly for those who have what it takes and who have been battling against the bad businesses who undercut price. While it is not always necessary to discount deeply to the same level, it does require some "contribution" to the client. So margins can take a hammering. Remember the clients are often also in a similar industry.

I believe there are three key issues that are important during difficult times.

1. SMEs must be in clear defined and deep niche markets. This is the safest place to be as a SME. Too often SMEs simply try and compete on price and that is the death knell of the business.

2. Innovation. Keep everyone guessing. Keep changing what you are doing and the way you are doing it. Keep changing what you take and how you take it to market. Every time the competitors work it out, you should have changed again, so that they are expending most of their energy chasing you and not the client.

3. Maintain margins. A large part of this is the relationships with the clients. Obviously if you are in industrial sales markets it is easier, but it is possible in different ways with consumer focused businesses too. Networks and relationships always come to the fore during tough times.

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