The crisis is here

The next few months will be dreadful for SMEs that do not have a crisis recovery plan.

While the sharemarket makes every effort to believe that it has hit the bottom, fiscal fiends are pumping out paper money like confetti in a desperate bid to keep small business liquidity sufficiently high to slow down a world wide job crash.

The US Fed has recognised that job losses, declining equity and reduced credit extensions have caused consumer confidence to plummet.

While Kevin and Wayne attempt to twist the arms of the G20 mandarins, takeover and merger merchants are beginning to buy up assets that will stand them in good stead as they downsize staff, outsource supply, and look for new market channels.

It is time for SMEs to adopt a triage strategy in relation to key clients. Divide them up into three piles – those that have a future; those that are struggling to survive and cutting key staff; and those that are already past it.

Build your brand reputation with the first of these by going out and finding ways to build viable and sustainable relationships. Look for cost savings and deferring non-essentials, use these rolled-gold clients as evidence for your bankers to consider when they are choosing who to extend loans to on their call lists for growth.

Don’t give discounts for large orders, but be prepared to give marginally better terms of trade, based on your long-term business relationships.

With the second pile, accept the fact that you are not a bank or a charity and get really tough in all aspects of your business. Operate on a pay-as-you-go cashflow basis. Negotiate with vendors to get longer term business contracts. Use this as a line of credit with the second pile clients.

The last group represents the last gasp. Only take on these clients on a pay-in-advance basis, and demand full cost recovery for the services that you provide.

Only spend on what you need to acquire revenue, collect faster, and before you agree to deliver to these high risk prospects, wait until there is a full evidence of recovery at the end of the year.

Dr Colin Benjamin is Entrepreneurship and Strategic Thinking Consultant at Marshall Place Associates, which offers a range of strategic thinking tools that open up possibilities for individuals and organisations committed to applying the processes of innovation, creativity and entrepreneurship. Contact: CEO Dr Jane Shelton. 

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