SMEs are most vulnerable to economic turmoil, but what about the turmoil in their own business
As the country deals with a possible downgrade to junk status, business owners are facing uncertain times, in particular those who operate small to medium enterprises.
However, these tough economic times also present an opportunity to look at one’s business and address weaknesses in order to guarantee survival.
It is perhaps an uncomfortable truth that many businesses operate in a way that is not too dissimilar to the way the country is being run:
- poor controls and systems,
- no clear vision,
- the wrong people in the wrong positions,
- lack of accountability, and
- choosing to ignore warning signs that a collapse is imminent.
Furthermore, even when these problems are acknowledged, the concept of change is not easily accepted or embraced. It often takes hitting rock bottom before business owners seek help and advice.
In his book “The E-Myth revisited”, Michael Gerber notes that most business owners when deciding to start their business, are very good at a specific technical skill and they know how to do the work.
They however know very little about running a business!
This is precisely how owners Wynand and Riet Grove of Grove Optometrists in Kempton Park felt.
According to Grove when they opened the practice many years ago there was a lot less competition and so the need to actively market their business was not really necessary.
However, in recent years the number of optometrists both independent and chains has increased affecting their business.
“We had also become complacent – just doing things the way we had always done them but not getting the same results,” says Grove. “Being introduced to a business coach happened at the perfect time. It forced us to stop and relook how we were running the practice.”
One of the realizations was that times have changed.
They were still old school and did not recognize that even medical practices are businesses that must have systems and be marketed.
Finding their unique selling point and differentiating themselves from their competitors was essential.
Updating their website, using social media and actively looking for customers was critical to turning the business around.
“One of the big changes we made was not waiting for customers to come to us, for example building a database that we could connect with was a great way of introducing ourselves to potential customers,” explains Grove.
She adds that updating costing practices also helped deliver better margins for the business.
As a business coach, I know what Grove Optometrists managed to do was to identify their unique selling point which has helped generate more leads many of which have become regular customers.
“What they have also done is gained an understanding their financials.
Knowing your numbers and being able to forecast your cash flow makes managing inevitable bumps in the economy that much easier.”
Most small to medium enterprises do not have proper financial systems in place and tend to be treading a fine line between financial stability and disaster.
This may not be too serious in a country whose economy is doing well as there is less likelihood of recession which inevitably puts businesses under stress.
However, in a country like South Africa where economic downgrades are a reality, a sudden downturn may be the death knell for marginal businesses.
Taking on the competition
After deciding to open their own business which saw some of their suppliers becoming direct competition, Hydrostatic Sales and Services, also from Kempton Park, found themselves in a position where the business was showing all the signs of potential but just not getting there.
“We opened the business in 2013 and although it was doing well, we knew there was more opportunity for growth but we were just not able to capitalize on it,” explains Cindy Tift.
What became obvious was that while the company was doing well, there were no formal procedures or systems and no history.
To increase sales and really grow the business meant implementing systems.
Junk-proofing one’s business requires focusing on four basic systemization areas:
- systems and technology;
- delivery and distribution,
- accounting test and measure, and finally
- people and education.
“Too many small businesses, which are often family run organizations, end up working in the business rather than on the business which is what is needed for growth and success,” he says.
Tift explains that crucial steps were taken to gain a better understanding and grip on the financial functioning of the business.
This was done by putting formal budgets in place and closely managing cashflow.
She adds that focusing on what are real issues versus perceived issues and on what needs to be done by using deadlines helped to streamline the business and delivered results.
Education and team work have also become a crucial game-changer for the company.
Investing in staff training and education and an annual conference have all helped turn the company from a family run company into a respected player in the competitive hydraulic pump industry.
Getting the right team on the bus is extremely important. Creating a professional and productive culture can make or break your business.
It is one thing to be hands on in a business – it is another when everything falls at the owner’s feet. Training your staff and recruiting for key skills can make all the difference.
Delegation, hiring the right people for the right job and investing in training frees business owners up to work on the back end of their organizations which is where the cracks normally appear.
As we approach even more challenging economic times applying basic steps towards building a better stronger and more resilient business will ensure that your business does not end up being downgraded to junk.
Connect with me today to schedule a one hour free business strategy consultation session to discuss your business focus areas.
Yours in great business,