Tips to help your business thrive during uncertain times
Starting and running a business has never been easy, more so in times when unavoidable external factors are threatening to slow down your business operations. Political upheavals, unrest in foreign markets, changes in tax policies etc. are all challenges that a business may undergo through.
Here are five tips every business owner can use to ensure they thrive during uncertain times:
1: Make Sure Your Business Model is Still Viable
Remember your business plan? It’s what gave shape to your dream, helped you get your startup financing and defined your value proposition. It took a lot of hard work to create it but if you’re like most business owners you probably haven’t considered whether it’s relevant to your current situation.
One of the best things you can do to ensure your business doesn’t just survive but thrive during uncertain times is to look at your business model frequently. Talk with your employees, suppliers, lenders and customer and research your competitors. Use the feedback and information to identify your strengths and areas that need improvement. You may find that your business model needs some tweaking. You may also discover new opportunities you hadn’t seen before.
2: Audit Your Spending
Businesses will often have big unnecessary expenses, but you might be surprised at how much you could be saving if you only knew where all that money was going. Performing a thorough review of your business spending can help you identify expenses that don’t contribute to your growth. These should be cut or eliminated altogether. The money you save can then be reallocated to those that do promote growth.
You may have to make some hard choices but the time you spend auditing and restructuring your expenses will be worth the effort.
3: Analyze Your Cash Flow
Cash flow is the lifeblood that keeps your business going. Unfortunately, cash flow problems can arise suddenly and unexpectedly due to a variety of factors. These can include downturns in the overall economy, new competitors vying for a slice of the pie, natural disasters, and others.
There are also times when your business can fall victim to the cash flow issues experienced by your customers. If they experience a downturn in business, they may be less likely to pay their bills in a timely manner; resulting in a domino effect that can impact your business.
So, what’s the solution? Make sure to maintain good relationships with lenders, regardless of your need to borrow. Establishing a good track record with your financier can make it easier to get loans and lines of credit.
More and more small businesses are using invoice factoring to safeguard against cash flow problems. Factoring offers several advantages over traditional bank loans and lines of credit, including faster approval times. FACTS Africa specializes in this sort of business financing where their online platforms are effective and friendly to any user.
Whichever route you choose, it’s a good idea to have a safety net in place during uncertain times.
4: Strengthen Relationships with Existing Customers and Prospect for New Ones
Every business owner knows that retaining existing customers is far easier and less expensive than getting new ones. In uncertain times, it’s a good idea to focus on relationships with your customers. This might include offering special rewards or discounts to loyal customers but just taking the time to call or drop by and see if all their needs are being met can also go a long way towards retaining their business.
While you’re at it, you should politely let your satisfied customers know that you would appreciate any referrals they can send your way and offer to reciprocate the favor.
You should also analyze your customer acquisition processes. Focus more effort on activities that have generated results in the past, and abandon those that haven’t proven fruitful. Attending local business functions and joining business associations local networking groups are all good ways to increase your exposure and acquire new customers.
5: Review Your Marketing and Advertising Strategy
When it comes to promoting your business, don’t keep all your eggs in one basket.
For all its advantages, online advertising has its own inherent uncertainties. While Google, Facebook and other online platforms are still the most effective and economical way for most small businesses to promote themselves, you should also consider investing a portion of your capital in offline methods including radio, television, newspaper, and direct mail marketing.
Many at times, businesses find themselves in a fix where they cannot meet their short term financial obligations due to delayed payments or slow-moving stock.
Working capital is defined as the amount of capital needed to carry on a business – regardless of size. By calculating your working capital, you able to understand something much deeper: your liquidity. With this measurement, you can make an accurate assumption on the efficiency and financial stability of your company.
So why is working capital important to any business: Besides the fact that understanding your working capital needs can provide you with great insight on your company’s financial health, strong working capital management can enable you to propel your business forward.
When you maintain a certain level of working capital, you can not only successfully pay off your short-term expenses and debts – which in most cases are paid in cash, but you can also pick and choose the right money to set aside for investing in your future.
Some of the top reasons why you might need working capital to keep your business moving are as follows:
Controlling the components of working capital is key to managing your working capital requirements for your business. Having too little WC (working capital) impairs a company’s ability to meet its financial obligations. It is hard to pay expenses or debts when they fall due.
WC can be adjusted by increasing or decreasing its two components: Current Assets (CA) and Current Liabilities(CL). Increasing CA or decreasing CL increases WC. Management can enact several policies to improve the WC situation of a business as follows:
By adjusting these four primary influencers on Current Assets and Current Liabilities, management can change WC to a desirable level.
Cash is king and much effort should go to maintaining a business’s working capital needs at optimal levels for smooth business operations.
Over the years, we have seen the payment of goods and services evolve from one form to another: barter, coins, paper, plastic, and now, phones. People are now using smart phones all over the world to complete daily tasks including paying for goods and services. That’s why small businesses are encouraged to embrace mobile payments so that customers can pay as easily as possible.
Mobile payments encompass mobile wallets and mobile money transfers, both taking place through the mobile device. Mobile payment is gaining momentum especially with the need among consumers not to carry physical cash. The usage of mobile payments especially among millennials will continue to increase. It is suggested that by 2025, 75% of all financial transactions will be cashless.
Here are the top five reasons why small businesses should adopt mobile payment technology:
Contactless payments are the most convenient transactions that can be completed a lot quicker. Mobile payments allow for lower wait times at check out which in turn improves the customer experience. Consumers can also access more accounts without the need to carry a physical wallet with all the different cards and cash. All the necessary data is stored in a mobile device. In 2015, a research done by Business Insider showed that 40% of millennials would rather switch to mobile payments and give up carrying cash.
Carrying physical cash has a risk of either losing your money or worse, a thief stealing it from you. Digital money, carried by way of a mobile phone is much safer. Mobile payment service providers thus recognize the importance of strengthening the security of contactless payments. Service providers are using different methods to encrypt customer data – use of passwords and/or touch IDs are becoming common to further strengthen security measures to avoid instances of hacking and/or fraud. In case a phone is stolen, a payment activity can easily be frozen.
The use of mobile payments is a shift away from a card to an omnichannel future, where the payment methods will grow drastically. Business can get in on these trends early by incorporating mobile payments into their app or website.
Recent research shows that consumers spend more than twice as much money through digital channels and tend to shop more often if they use mobile payments. Retailers that move quickly will gain the interest and loyalty of the valuable consumers who are the primarily early adopters of mobile payments.
When you run a business, you need an easy accounting system that will allow you to invoice customers, pay bills and share all your payments with the accountant. Introducing mobile payment solutions can help a business achieve better cash flow management. With the help of mobile payments, small businesses can reduce costs such as bank charges and overheads and can better evaluate their cash flow position.
People are ready to embrace mobile payments. Whether it is buying clothes or paying bills, people are more than ready and willing to accept a payment method that can help them to avoid wait times when paying for the goods and services. By providing an opportunity for customers to pay at any time, you provide not only a convenient solution but a payment experience.
The future of payments is going to be all about mobile. Implementing mobile payment will become an essential part of your business. One of the biggest advantages of mobile payments is a financial convenience which allows managing money anywhere and at any time. As they become more secure and customer-oriented, mobile payments will play a relevant role in the future of finance and consumers.
The Equitable Prosperity – Maendeleo Sawa (M-SAWA) project is a seven year, $28.7 million initiative funded/implemented by Mennonite Economic Development Associates (MEDA) (supporters, partners and investors) with funding from Global Affairs Canada (GAC) which will run from 2015 to 2022
The project aims to contribute to Kenya’s economic growth and increase job creation by improving the business, environmental and gender performance of small and medium enterprises (SMEs) and small entrepreneurs (SEs) in select counties along the Northern and LAPSSET Corridors in the following sectors: Agriculture/Agribusiness, Construction/Allied Industries, and Extractives.
What types of Grants does M-SAWA offer?
MEDA offers the following Matching Grants to qualified SMEs and Business Associations.
Is your business eligible? Read more http://meda.org/publications-m-sawa/290-m-sawa-project-overview
Interested in Applying for Funding?
Go to https://meda.blitzen.com/form/Kenya-M-Sawa-Project to fill out our eligibility survey.
For more information contact the M-SAWA office: M-SAWA@meda.org +254 706 348 613
Sub-Saharan Africa is dominated by micro-entrepreneurs who struggle to grow their businesses; and these small firms are most likely to fail due to the high levels of uncertainty and risk in their local environments. This instability is brought about by many factors including political and economic instability, changes in global commodity prices and regulations.
The world bank lists the top five constraints in Africa’s business environment as practices of the informal sector, corruption, political instability, lack of electricity and lack of access to finance along with a lack of skilled labor and adequate training. The resources necessary to grow a business such as finance, human resources and social capital and infrastructure are less accessible in Africa
SMEs face a more difficult situation in raising money when compared to large firms. This is because many banks prefer to allocate their resources to large enterprises due to the lower risk of default and that they have clear financial statements, both of which SMEs lack leading to cash flow constraints.
Businesses in sub-Saharan Africa are, on average, up to 24% smaller than businesses in other parts of the world, as well as being far less productive and competitive. And even when small firms in Africa do manage to grow into larger enterprises, they do not see the gains in productivity we might all expect. The result is that there are relatively few large firms in Africa compared to other developing countries, though this trend is slowly changing.
There have been rapid changes in technology. The E-commerce market is expanding. This means that individuals prefer internet sales to over the counter sales. Most SMEs lack an online presence thus are unable to sufficiently utilize these opportunities. They lack their own websites to market their own goods. Making large profits does not matter if businesses are unable to effectively manage cash flow. SMEs also lack the adequate skills when it comes to financial management. They should avoid overdependence on one or two very large clients. They should take insurance against debt. These are some of the financial management skills needed.
The aforementioned conditions will cause real problems for Africa going forward if not well addressed and fast because the continent has one of the world’s youngest populations, and it is set to double by 2050, meaning the demand for stable wages and employment will rise drastically. To note is that most employment in Africa is characterized as vulnerable employment meaning that individuals are likely to be working in seasonal agriculture jobs and/ or running micro and small businesses (many of which are in the Agri-sector) which have no guaranteed high incomes or wage receipts. Although this type of employment provides an important source of income for many, it does not typically increase productivity and investment in local economies, nor spur the growth required to drastically increase prosperity.
It is at times like these that we’d typically look to entrepreneurs to create innovative, high growth businesses that will increase the demand and capacity for skilled labor, provide stable wages and employment and attract foreign investment. This makes it more important for Africa’s entrepreneurs to overcome the challenges presented by their current environment. Ensuring that finance is available to firms with the potential for growth should be one way to ensure that the above challenges are overcome. Another is to offer better education and skills training. Both these efforts should improve aspects of the local business environment and help to decrease the failure rate of start-ups.
SMEs are engines of growth, vital to most economies. Research suggests that micro businesses and SMEs account for 95% of firms in most countries. They create jobs, contribute to GDP, aid industrial development, satisfy local demand from services, innovate and support large firms with inputs and services.
In Africa, SMEs create 80% of employment, establishing a new middle class and stimulating demand for new goods and services. The IMFs Regional Economic Outlook for Sub-Sharan Africa, released in April 2015, says: “Over the next 20 years, sub-Saharan Africa will become the main source of new entrants into the global labor force”. This is an emerging Africa that is absolutely determined to succeed. As a follow up to their bold commitment to infrastructure investment, African governments have now turned to entrepreneurs to support future growth. A vibrant SME sector is a vital ingredient for a healthy market economy. SMEs are responsible for large contributions to value added activities and employment.
The role of small businesses in poverty alleviation, economic growth and job creations has emerged as an important topic in Africa. The importance of small businesses arose in view of the dismal performance of previous policies that emphasized large scale industrialization. Recent economic reforms in African countries have also created opportunities for the fledgling small businesses, and thus generated interest in small business research initiatives. It is generally agreed that encouraging the development of small businesses is an effective way of fostering growth and alleviation of poverty.
Indeed, the foundation of any long-lasting venture in Africa depends on the continuous empowerment of regional SMEs and young entrepreneurs. Governments, the private sector and international investors are encouraged to consider Africa’s young people and SMEs as central to the stability of the world’s economy. These millions of future entrepreneurs need to be nurtured so that the world at large can benefit. Helping African SMEs to flourish is crucial not only for Africa but for the global economy, because it creates a growing middle class with disposable incomes, in tandem with market opportunities for new investors.
However, due to internal inefficiencies and constraints in the business environment, the output of most SMEs can be well below their potential. While small businesses tend to be more flexible and quick to change than larger corporates, they are much more vulnerable to deterioration in the business environment and suffer heavily from stringent policies. They also have fewer resources to draw on when times are hard. Nonetheless, small businesses are very crucial in any economy. While a single, small business may not generate as much money as a large company, it is a critical component of and major contributor to the strength of local communities.
Ignite my SME is an initiative of FACTS Africa that seeks to provide SMEs with an opportunity to learn, network and showcase their products through a series of seminars across Kenya, Uganda and Tanzania. These seminars target SMEs from all economic sectors that are in the phase of rapid business acceleration and hence would benefit enormously from coaching, mentoring, finance or advisory services to realize their expansion plans.
There exists many small and promising SMEs in Sub-Saharan Africa that have skill gaps and/or limited experience which inhibit them from running a successful business and realizing their full potential. This is especially true for companies that have an established business model but seem to stall; where they could enter a period of accelerated growth. It is exactly in this acceleration phase when the complexities of running a business increase rapidly and when the risk of derailment is a constant threat. FACTS has a direct interest in working with strong and well managed clients, and that’s why we want to contribute to building better companies. The Ignite seminars are intended to catalyze ambition to excel.
Ideally, successful entrepreneurs will master skills in three dimensions: Sales, Operations and Finance. But what we find in reality is that many owners/managers are strong in 1 field, and sometimes 2, but rarely in all 3. With this idea in mind, Ignite my SME was born to offer, through a one-day event, a holistic approach that will cut across all three dimensions as mentioned above. A line up of professionals in their respective fields will be available to give insight on key areas of running small businesses.
The IGNITE seminars comprise of a series of 10 seminars across Kenya (4), Uganda (3) and Tanzania (3). Out of these 10 seminars, we shall have 1 women seminar per country. These are intended to be 1-day seminars with each bringing together up to 150 emerging SMEs across all sectors of the economy as well as SME solution providers. The IGNITE seminars will combine approximately 6 plenary presentations on Sales, Finance and Operations, with ample opportunity to network and engage with various SME solution providers. The seminars will be conducted in the period Aug 2017 to June 2018.
Through the Ignite my SME seminars, we want to (re)emphasize to SME owners/managers what it takes of build a world class company and how they would benefit from working with specialists in different fields. A 1-day seminar will hardly reinvent business models, but the essence is to create an inspirational event that presents the attendees with some “quick win” ideas and an eye opener towards outside assistance.
The common thread through the presentations is “…towards building a world class business…” hence the Ignite my SME slogan ‘Growth Through Excellence’. The events provide a great chance to meet and interact with several established SMEs that are rapidly growing. Additionally, this will be an opportunity to network as well as showcase one’s products/services.