Three business practices to help SMEs traverse the impending recession
There is no question, tighter economic times are ahead, so how can you best position your business to be more efficient?
There is no question, tighter times are ahead.
Coming off of multiple RBA rate rises in a row, and more expected to come, the market outlook is unsteady.
For Australian small businesses, the uncertainty of the last two years continues.
Elon Musk, when referring to his opinion of the US market forecast, said he’s hyper aware a recession is on its way. When it hits, the likely outcome is inefficient businesses wont make it through.
Musk isn’t the only one with these views, with these sentiments grounded throughout history.
From inefficient to efficient
What does it mean for a business to be inefficient?
Businesses ultimately exist to solve problems for their customers and generate a financial return for doing so.
Some businesses do it better than others, the ones that do it the best are more capable at weathering a period of lower consumer spending volumes, higher costs and supply chain challenges.
So how can you best position your business to be more efficient?
First: have a plan. After more than 10 years in practice, it still astonishes me that businesses and business owners wake up each day and go with the proverbial flow.
Planning is important, even if it’s very basic. The planning process forces businesses to self-reflect, work out what they want, what they’re striving for and what the market outlook is. Planning creates focus on the more strategic areas of the business while also adding structure which is more easily measured and creates accountability.
There are hundreds of business plan templates freely available, and spending a few hours on completing one will do wonders for keeping a business on track when external forces are pushing it in different directions.
Second: know your numbers. Arguably this is interchangeable with the above as its just as astonishing how little detail business leaders know about what their margins are and what their monthly operating costs are.
Being across the numbers of your business is incredibly empowering when faced with tough decisions. Business cycles influence price and availability of most business inputs, actively monitoring these changes affords owners with the ability to pro-actively seek alternatives. For example, cheaper suppliers or more consistent suppliers and measuring the effect on the business bottom line before the changes flow through and hit it.
Leaving the business to be at the mercy of market changes is a significantly riskier approach as it leaves you completely exposed. Even if you’re quick to react, ground has already been lost to the competitors that were proactive.
Third: focus on value. As the cost of money increases, less money flows around the economy and less quickly. The in-pocket effect of this is that as people become more scrupulous, each individual purchase becomes more considered.
If your business demonstrates an abundance of value, the decision making process is less challenging than a competitor with an ‘offering’ that is borderline in terms of the value and the price. Customers of that competitor would rather hold their hard earned dollars than waste it on something that isn’t worth the money anymore. We all experience this.
Adding value through quality, service experience and after sales support are easy ways to quickly ensure your value proposition is at its strongest.
The full circle takeaway is that proactive businesses are the survivors, planning, understanding the detail and maximising value for customers are incredibly straight forward processes that successful businesses practice everyday.
