It’s no secret that small and medium enterprises (SMEs) have had more than their fair share of tribulations over the past few years – first Brexit, then COVID, and now soaring interest rates and sky-high energy costs. But whilst many SMEs are feeling shell-shocked, now is not the time for desperation – it’s the time for preparation and evolution. And these are changes that SMEs – small, agile, flexible, with quicker decision-making and less organisational baggage than larger firms – are strongly placed to deliver, as ‘pivoting’ during the pandemic clearly demonstrated.
So, how should SMEs prepare their business for the tricky times ahead – and perhaps even turn adversity into opportunity?
Keep calm, replan, rebound
Reviewing the business plan is critical to ensuring SMEs identify external impacts that could be coming, how they might affect the business, and what action to take. However, there are two important points here. Firstly, this is not some emergency procedure – it’s simply what most SMEs do regularly anyway. The practices are already in place, so it doesn’t spell disruption.
Secondly, in bad times, as in good, planning is an opportunity to quantify the positives, too. (Take the recent mini-budget, for example, which – infighting and U-turns aside – actually delivers significant financial upside into many SMEs’ plans). In any event, SMEs need to find and work with a trusted advisor to prepare a plan for how they would respond to different levels of revenue and cost reduction – and, indeed, increase.
Cut costs, keep lifelines
Shedding costs in difficult conditions is a no-brainer, but again, it’s worth pointing out that ongoing cost management is simply part and parcel of running a business – it’s not, of itself, an alarm bell. However, there is often a tendency in these circumstances for SMEs to target seemingly ‘discretionary’ costs that are in fact core to the business’s survival and success.
So, whilst many of the costs associated with products, services, people, and processes, for example, can typically show room for rationalisation, marketing (brand and promotion) spend is also often cut when times are tough. This is a mistake. Difficult trading conditions are precisely when businesses need marketing most.
Add to this the fact that share of voice in a downturn tends to translate to share of market after it and keeping the marketing lifeline intact will have positive outcomes for many SMEs long after the current turbulence has passed.
Cash in
Cash is king for SMEs, and a healthy cash flow helps create solid foundations for the business, even if the wider economic ground is shaky. Managing cash carefully once it’s in the coffers is of course paramount, but it’s important for SMEs to exploit the many opportunities that exist to get cash into the business faster and more efficiently in the first place – even in a downturn.
Payment methods and terms are key, here. Card payments, for example, are now cheaper and more accessible for SMEs than ever before, driven to a large extent by ‘contactless COVID’. They make it easier and quicker for customers to pay invoices, enable them to spend more than the cash they actually have (on credit cards), and make it possible for SMEs to expand into online sales.
There are also opportunities for many SMEs to ‘upfront’ payments for their products and services through subscription models, via direct debit, standing order, and (again) card transactions, all of which smooth cash flow in straitened times. Of course, one of the things that does the greatest harm to cash flow is bad payers. SMEs should connect to credit controllers and debt collectors (these can often be commissioned through an accountant) to accelerate payment of late invoices and shortening payment terms where possible.
Communicate strongly
Forget the old PR adages of ‘putting your head above the parapet’ or ‘tall poppy syndrome’ – in a downturn, SMEs must communicate regularly and compellingly with suppliers, customers, and prospects, to show activity, growth, positive news, resilience – and convey a Plan B if upheaval strikes.
Building relationships – and gaining readers, followers, and listeners – will help SMEs get the message out that it is ‘business as usual’ and will calm the rumour mill (which goes into overdrive when companies clam up, particularly during a downturn).
Networking, email campaigns, social media activity, digital product or service promotions, and marketing partnerships with complementary businesses are all key to maintaining a credible and memorable communications presence through difficult times.
Network, innovate, diversify
Change can be painful when tackled alone, so building a network of contacts, like-minded individuals, advisors, and peers is core to finding the inspiration, resources, and opportunities to help SMEs reshape their businesses. This can mean, for example, finding different energy suppliers to reduce costs, or identifying outsourced providers to enhance efficiency and productivity.
It can mean consulting subject matter experts on pricing, market research and segmentation, and product and service proposition, to focus efforts on driving and funding innovation. It can mean making contact with revenue stream partners who can cross-promote products and services through their own channels, and enable the other business to do the same, empowering diversification.
In fact, it can mean all the hidden good that SMEs can find in an uncertain climate. As the song goes, ‘accentuate the positives’ – and that tune sounds sweeter to SMEs when they have access to the right people, expertise, resources, tools, and support.
For more information on how Bedfordshire Chamber of Commerce connects its SME members to help and support to help them bounce back stronger in trying times, visit here, or call us on 01582 522448.
