With evening news bulletins and chatter in boardrooms centred around interest rates, record levels of vacancies and the state of the economy, it is fair to assume that the next few years will be turbulent for businesses, with some experts drawing parallels to the Global Financial Crisis.
It can be seductive for businesses, to become risk averse, stay their course and not push for growth. However, there is an opportunity for SMEs to win market share as competitors struggle. Turbulent times are also a crucible of innovation and can revive tired business models and galvanise an SME’s workforce.
So, what steps can SMEs take to prepare for stormy weather ahead?
1. Know who you are as a company and your growth pathway
The coming economic climate will present challenges, but also a plethora of opportunities; possibly more than you know what to do with. Knowing who you are as a company and mapping out your pathway to growth ahead of these times will provide an important framework when it comes to decision-making.
Do you want to grow through recruitment or acquisition? Is it time to open in a new territory where a competitor is failing? Knowing the essence of who you are as a company and being clear about how you will grow over the medium term will help inform all these major decisions.
2. Keep an opportunity register
As humans, we have become very attuned to mitigating risk within our businesses, preparing for unlucky outcomes, and keeping registers of all the risks that we may encounter. While there is value in this practice, it’s also important to never ‘waste a good crisis’.
There is an equal amount of value in keeping opportunity registers. It’s essentially a list of all the incredible options that would substantially grow your business. In the same way that you would have lead indicators or red flags in your risk register, your opportunities should have signalling green lights, so that you and your company can recognise, and act quickly on the perfect opportunities to grow. This is crucial as some of these opportunities might only come around once in a lifetime.
3. Understand your capital requirements
Cash is the gateway to growth, so it’s essential to ensure that you have access to it to capitalise on opportunities. One way is to start having conversations with your bank about your plans for growth. It’s important that your banker understands your business, your cashflow, and sees that you have a thorough understanding of the risks and opportunities on the horizon. This will save you crucial time in an urgent situation when you need capital fast, as the borrowing process is likely to be a lot smoother.
Something else to consider would also be to lower rates of dividend payout for the next two years so that you have more in the war chest at this critical juncture.
4. Double down on marketing
There is a tendency to cut discretionary spending when times get tough and a popular area to cut from is marketing. This can be a mistake because customers who want your product will still be out there. And without marketing, they’re even less likely to know that you have what they need or want.
Keep in mind that competitors may themselves cut back on marketing, so it can be advantageous to ramp up your marketing spend because customer acquisition could become cheaper in this environment. More customers mean more revenue, more cashflow and a higher chance of your being able to action things on your opportunities register.
Stormy times are ahead for all Australian businesses, but SMEs can use these circumstances to their advantage and create longitudinal benefits for their companies.
