SMEs really do have the best of it and the worst of it. They always battle to access finance for a variety of reasons both inside and outside their control. Thats the worst of it. But lets look at the other side of the coin.
SMEs have flexibility and management control. So what should we do to survive the recession.
1. Act - make decisions and do something
2. Review all costs and cut what you can. Just get rid of the fat. Do not destroy your business' capacity to meet the clients' needs. But remember, no one ever saved themselves out of trouble.
3. If it is tough for you, it is tough for almost everyone. So, contact your suppliers and see if they can provide you with better prices. They need to keep your business to survive, so they may well be prepared to offer better pricing, and perhaps even better terms. If so, take advantage.
4. Visit your clients. Change your pricing methodologies so that competitors find it difficult to compete on price as they cannot understand how you have priced to the client. Change the rules of the game so that competitors have to stop competing to understand the rules.
5. To change the pricing to the client includes the necessity to change how you do business with your client. Can you add more value? How? Offer this to the client! The more value you add, the lower the client's costs should be. The more value you add, the more difficult to unravel your pricing.
Essentially, be proactive and not reactive, and keep your creativity levels high. Read a lot to find new ideas.
Dr Rob Smorfitt
Showing posts with label survival. Show all posts
Showing posts with label survival. Show all posts
Monday, April 13, 2009
Saturday, April 11, 2009
SMEs - more tips on surviving the recession
The truth is that many businesses are started as a flash of entrepreneurial endeavour. However, once the entreprenreur is living comfortably, the fear of losing it all is deemed to be too high a risk, and so the entrepreneur simply resorts to managing the business rather than by seeking continous entrepreneurial opportunities.
It is simply required that the business owner recognise that the owning/managing of a business is not an entrepreneurial event. Entrepreneurship is an action not a state of being.
Small business owners need to find and rekindle the entrepreneurial spark that got them going. They need to understand that the risk associated with doing nothing is much higher for the business, than the introduction of entrepreneurial activities would be.
Growth and new ideas do carry risk, but the more experience you have the lower this risk is, and it is definitely a lower level risk than doing nothing represents.
In a word, surviving the recession requires ACTION. Do something. Stop whining and complaining about how tough it is. Remember that it is tough for everyone, and if your competitors are hurting, they could represent opportunities, either directly or indirectly.
Dr Rob Smorfitt
It is simply required that the business owner recognise that the owning/managing of a business is not an entrepreneurial event. Entrepreneurship is an action not a state of being.
Small business owners need to find and rekindle the entrepreneurial spark that got them going. They need to understand that the risk associated with doing nothing is much higher for the business, than the introduction of entrepreneurial activities would be.
Growth and new ideas do carry risk, but the more experience you have the lower this risk is, and it is definitely a lower level risk than doing nothing represents.
In a word, surviving the recession requires ACTION. Do something. Stop whining and complaining about how tough it is. Remember that it is tough for everyone, and if your competitors are hurting, they could represent opportunities, either directly or indirectly.
Dr Rob Smorfitt
Sunday, April 5, 2009
SMEs - surviving the recession in Africa
Can SMEs survive the recession in Africa? I believe they can.
The secret is to shift away from supplying to other international markets which are contracting, and to focus on the African markets.
They may not always be as sophisticated, and certain markets may not exist, but many SMEs could make the shift to African marrkets.
Large parts of Africa are still growing despite the global financial recession. The improvement in democracy in Africa, although patchy and weak, is happening nonetheless. This is in turn leading to infrastructural investment which is stimulating the markets, together with the demand for commodities with the Chinese gladly assisting in the extraction thereof. Angola is flying as are other countries.
There is obviously credit risk among other forms of risk, but many African governments understand and recognise this, and offer their citizens insurance against the risks associated with Africa. South Africa does.
The secret is to educate Africa into understanding that there is greater prosperity in commerce than in corruption, and it is also more sustainable.
The black African diaspora need to start lobbying to change the African context, and not simply write great stories from the comfort of New York. Come back and make a difference.
Regards
Dr Rob Smorfitt
The secret is to shift away from supplying to other international markets which are contracting, and to focus on the African markets.
They may not always be as sophisticated, and certain markets may not exist, but many SMEs could make the shift to African marrkets.
Large parts of Africa are still growing despite the global financial recession. The improvement in democracy in Africa, although patchy and weak, is happening nonetheless. This is in turn leading to infrastructural investment which is stimulating the markets, together with the demand for commodities with the Chinese gladly assisting in the extraction thereof. Angola is flying as are other countries.
There is obviously credit risk among other forms of risk, but many African governments understand and recognise this, and offer their citizens insurance against the risks associated with Africa. South Africa does.
The secret is to educate Africa into understanding that there is greater prosperity in commerce than in corruption, and it is also more sustainable.
The black African diaspora need to start lobbying to change the African context, and not simply write great stories from the comfort of New York. Come back and make a difference.
Regards
Dr Rob Smorfitt
SMEs - should governments be bailing them out during the 2009 financial crisis?
Firstly I want to categorically state that I am an SME owner myself.
Secondly my answer to this question is a definite NO. Many people will query my position on this question but let me explain my position.
All economies are cyclical with good times and bad times. A recession is just a bad time that is worse than the normal cyclical bad time. Hell yes, it is difficult to survive a recession, and many SMEs will not make it. But then again many large businesses will not make it either.
Should governments be helping them all? In my mind this is a socialist approach that merely sustains, at best, mediocre businesses. All businesses are able to access the same information and market intelligence. If a business is not sufficiently opportunity aware, nor innovative enough to adapt, or resistant to change, then they deserve to make way for those businesses that are.
Sure it is difficult for those who crash and burn, at a personal, financial and psychological level. However, the true entrepreneurs will bounce back. Those that do not, do not deserve to be there.
All businesses are equal in principle. The difference lies in the management thereof, and if management fails to manage correctly they must be allowed to fail.
A recent article I read showed how a number of todays large successful businesses started during the Great Depression.
A business I am aware of were advised to reduce staff. They did so partially and then promptly re-employed, because the management were weak. The recession started to grip and new investors terminated more than 50% of the staff day 1 (among other things). Tough times for those staff, but the business will now quite likely survive. Good management leads to survival and success.
So I say to governments that the secret is not to throw good money away giving it to businesses that are quite likely to fail any way. Use that money to address the structural hole that exists which minimises bank lending to SMEs. Close the hole and increase the flow of funding to SMEs and then only those businesses that are likely to succeed will get funding and continue. This will be at a greatly increased level to current funding for SMEs but will be done purely on a commercially viable lending basis. Fund research into closing this structural hole, so that banks can lend with reduced risk.
Secondly my answer to this question is a definite NO. Many people will query my position on this question but let me explain my position.
All economies are cyclical with good times and bad times. A recession is just a bad time that is worse than the normal cyclical bad time. Hell yes, it is difficult to survive a recession, and many SMEs will not make it. But then again many large businesses will not make it either.
Should governments be helping them all? In my mind this is a socialist approach that merely sustains, at best, mediocre businesses. All businesses are able to access the same information and market intelligence. If a business is not sufficiently opportunity aware, nor innovative enough to adapt, or resistant to change, then they deserve to make way for those businesses that are.
Sure it is difficult for those who crash and burn, at a personal, financial and psychological level. However, the true entrepreneurs will bounce back. Those that do not, do not deserve to be there.
All businesses are equal in principle. The difference lies in the management thereof, and if management fails to manage correctly they must be allowed to fail.
A recent article I read showed how a number of todays large successful businesses started during the Great Depression.
A business I am aware of were advised to reduce staff. They did so partially and then promptly re-employed, because the management were weak. The recession started to grip and new investors terminated more than 50% of the staff day 1 (among other things). Tough times for those staff, but the business will now quite likely survive. Good management leads to survival and success.
So I say to governments that the secret is not to throw good money away giving it to businesses that are quite likely to fail any way. Use that money to address the structural hole that exists which minimises bank lending to SMEs. Close the hole and increase the flow of funding to SMEs and then only those businesses that are likely to succeed will get funding and continue. This will be at a greatly increased level to current funding for SMEs but will be done purely on a commercially viable lending basis. Fund research into closing this structural hole, so that banks can lend with reduced risk.
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