It’s a tough season to be in as an entrepreneur with the challenging harsh economic times we are experiencing. In the recent months if not weeks global companies have been announcing layoffs from Twitter,Amazon,Apple and Metta.
Back here in Kenya companies such Twiga,Sendy,Market Force among others have had to make changes so as to steer their businesses to remain afloat while facing these economic challenges.
As at October 2022 Kenya’s inflation rate stood at 9.59% which is up from September 2022 at 9.18%. Prices for food and non-alcoholic beverages got to increase at a faster rate in October.
Additionally, prices for transportation also rose up which goes to affect everything else from the consumer end. With the rise of cost of living means consumers are spending less money. That, in turn, impacts the revenue of these companies. Less revenue means businesses need to cut costs.
Here are 5 ways as a small business can do to survive in a harsh economy
1. Manage your Cash Flow
While running a business “Cash is king” one needs to properly manage it well. To know the status of your company’s cash flow, look at your current cash flow statements daily(mobile/Bank cash reserves), look at your current invoicing and try to find any outstanding invoices that clients might be late with. Try and follow up with any clients that might be struggling to pay their invoices and try to work out payment plans with them.
The goal is to know how much cash you have that can cover business operations compared your sales, expenses and money owed. While running your small business you need to ensure that any money that you are owed gets to be paid as soon as possible.
2. Evaluate Your Expenses
As a small business here is where you reap the benefits of automating record keeping your sales, expenses and debt owed. If not get started by recording in a book, record all your sales and expenses, go through your mobile banking and bank statements .
- Look and be brutally honest whether the fancy expensive office or stall space makes sense or you can move to one which is affordable and get you to spare some cash or better partition and rent out (extra income). Is there outsourcing work that you can get to do inhouse.
- If you do deliveries can you pick a time that’s friendly less traffic and you get to bundle up deliveries for one location let the customer know in advance don’t keep them waiting.
- When it comes to communication can you select a package that can last a month instead of daily purchase of airtime or internet bundles.
Keep a daily track of your expenses this way you will know which can be eliminated or reduced.
3.Focus on your Best-Selling Products and Services
When you keep talking to your customers to better serve them you will know why they buy what they buy from you. Focus on your core products and services that you know performs best, and don’t waste your budget trying to support weaker products or services. As a small business you don’t require a heavy investment using BiasharaBook App will help you in that your phone is enough for stock inventory with reminder alerts.
Double down on selling your core products and services taking advantage of social media (WhatsApp, Instagram ,Tiktok).By doing focusing on the most profitable parts of your business during a recession when the economy turns again, you’ll be even better set up for success to try new things.
4.Debt management and new financing
When you find out that your cash reserves are low ,you might consider looking in financing options either in stock or capital from financial lenders.
It’s always good to have a line of credit already established with your lender this might save you stress in difficult times. Small businesses tend to be overlooked when it comes to getting loans for financing but it’s better if you can show proper records that even without collateral the lender can see the possibility of repayment .
NB: Be sure you carefully assess the additional costs and potential payment amounts to ensure the debt won’t simply put your business into more serious financial problems the last thing is to close down your business due to debts.
5.Talk to your customers
Acquiring a new customer can cost five times more than retaining an existing customer. I like the motto “Make Something People Want.” by Y Combinator which is an American technology startup accelerator. By building something people want leads to selling what people want which comes by constant keeping in touch with them. Keeping the right customers is valuable.
Now is the time to build real relationships with your customers go beyond just transactional. Show them that you have their back. Treat them with respect and value.
In conclusion this by no means a conclusive list it’s meant to give you a guide on what small businesses can start by doing. Feel free to add to the list in the comment section below.
Remember: Tough Times Never Last, But Tough People Do! -Robert H. Schuller