Help write a newspaper article
by Andrew Smith on 08/10/08 at 1:27 pm
5 comments
A major weekend newspaper contacted Ideate today and asked for some help with an article on how the current economic slump is affecting SME’s.
Below are the questions that were sent through. If you would like to contribute, comment on this post and leave your name, your company name, and your feedback. Specify the question number that you are answering (you don’t have to answer them all!).
Hopefully if your view or personal story is used in the article you will be quoted with your name and company.
1. I have spoken to an economist who said this was the worst period for SME’s in five years. Would you agree?
2. Are many SME’s in danger of closing down? Is this already happening?
3. Economists also say that SME’s involved in import/export will probably fare badly, because of the weakening rand. Have you noticed this?
4. Economists have also stated that SME’s heavily reliant on consumer-spending would also have it particularly rough. Have you noticed this trend?
5. Are the majority of SME’s cutting costs and/or trying to increase revenue to keep afloat?
6. Your Ideate blog, titled “Hell Week”, said Sept 21 to Sept 27 was one of the worst weeks for retail ever. Do you have a more specific time frame, eg, in the last ten years?
7. Would this be referring to specifically to small and medium enterprises as well?
8. What other challenges are facing SME’s during these tough economic times?
Andrew Smith is the pedantic systems guy behind Live Alchemy, a SA e-commerce company. Andrew writes for Ideate in an attempt to make the world a more efficient place. View more articles by Andrew Smith.
Muhammad Seedat
Oct 8th, 2008
Hi – In response to questions above:
1. This is a great time for SME’s – time to buckle down, reduce overheads and take on the big guns who are too scared to make a move during this crisis time – it is a time of opportunity.
2. SME’s who are not lean, mean and flexible will die. This is a time of weeding out businesses who would never have survived the long term. It is the time of truth. Rock solid businesses wait for these periods to see their competitors fall around them. They see out this period, using the time to consolidate and move forward stronger than they were.
3. If your product is price driven it will certainly affect you because it will be harder and harder to pass on price increases to your customers who will also be looking to cut costs. This emphasises the fact in this day and age you need to be selling a service with the product. This will ensure your customers stick with you. It is the value proposition and full ‘package’ that sets you apart from competitors and allows you to name your price.
4. If you are in a semi-luxury sector this will be the case.
5. Revenue increase will help to an extent – it will be easier to cut costs than increase revenue.
Fred
Oct 8th, 2008
1. It would be interesting to find out if that particular economist ran a small business himself. To me, that seems like a typical soundbite to ensure his statement is newsworth. It depends too much on what kind of industry you’re in. As for us (World Wide Creative), we’re choosing to see this time as an opportunity. Digital marketing is cost-effective and targeted, so we’ll use that to our advantage.
2. What’s new here? I think SME’s are always vulnerable. I agree with Muhammed (first comment) that this is a time that the stronger small businesses will use this time to survive while those around them fall.
3. I can see how import will suffer as a result of a weakening rand, but surely it can benefit exporters? World Wide Creative services clients in the UK and Europe, and we welcome their stronger currency with open arms.
4. World Wide Creative services medium and big corporates so it will take a while to trickle through to us. I think this will be the case for many service-related businesses with bigger clientèle.
5. We are a little more cautious about hard costs in light of the fact that spending is likely to slow down.
7. Personally I think that medium and large corps will be harder hit, since small enterprise is always under pressure.
8. Cash flow!!! Listening to Ideate readers, this seems to be the perennial problem with nearly all small businesses.
In closing, one of Ideate’s readers commented that ‘market is driven by sentiment’ – I agree with that. You can choose to see this time as opportunity, or you can scare yourself down a hole. It’s a time for clear thinking and smart strategy. This may be the best chance you’ll get for your small business to shine.
Robert Jewell
Oct 8th, 2008
I don’t think that one can generalise about SME’s and the effect of the economy. Take the example of one of my clients who is a retailer of auto parts. They have always been censervative in the financial management of their business. They kept their remuneration low and re-invested the profits in the business. As a result when the interest rates started to rise the only impact it had on them was to increase their interest income. Whilst their competitors felt the squeeze, they have used their financial strength to increas their turnover and profits. It all comes down to sound business and financial management, both in the good times and when times are tough.
The weak rand is a boost for exports, because it makes locally produced products cheaper when exported.
The advantage of SME’s is that they can very quickly adapt to changed market conditions. It is a good time to innovate, to put a business plan which is fundamentally sound into action, and to position for the upturn.
I have also often found that an entrepreneur has what is fundamentally a sound business, but it is the undisciplined spending of the owner which puts the golden goose at risk. There is only one fix. Be disciplined about your spending habits.
From Robert Jewell, partner in Accounting for Entrepreneurs (a4e)
Lizelle Steyn
Oct 8th, 2008
1. The last bear market ended in May 2003. Yes, for the 5 years since then gdp has been strong. It does seem that world markets are slowly slipping into recession territory, but there are always defensive businesses that do well during tough times. Beer companies, casinos and micro-financers, basic food companies are but a few.
2. Yes, with most consumers having less money in their pockets (and it is going to get worse) we are in for a period of higher-than-average business failures. Especially in highly competitive industries with perhaps an over-supply of product or service providers.
3. Exporters should benefit from weaker rand (our products become cheaper to foreign customers). Importers will suffer.
8. Easy credit is something of the past and businesses relying heavily on outside financing will struggle to raise funds via loans. They may have to issue more shares instead. Pity.
Tleli Makhetha
Oct 9th, 2008
One of the most important things for SME business owners is to have the confidence that their business will survive the current upheaval. The confidence must come from working harder on improving internal systems and processes to improve customer service. Share the confidence with your customers by communicating more and offer more value without necessarily trying to sell more. Confidence is important and it needs specific actions to be sustained.