Staying afloat in turbulent times
THE present economic conditions have taken a serious toll on businesses, particularly small and medium-sized enterprises (SMEs).
This development has negatively impacted their ability to be profitable, expand and create room for employment of the mass of the people.
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Among the conditions that is hurting their operations has to do with the volatile strength of the local currency which is making many, particularly those that import raw materials and some goods for sale unable to project into the future. Planning has also been badly affected due to the uncertainties.
For instance, in the first month of the year, the cedi lost almost 20 per cent of its value to the US dollar.
Headline inflation rate accelerated to 54.1 per cent at the end of December 2022 and expected to go even further up in January this year.
Bank of Ghana raised its monetary policy rate to 28 per cent, citing the continuous increase in inflation, heightened demand pressures in the foreign exchange market, uncertainties in the global economy, and rising inflation in many advanced economies as the basis for tightening of the monetary policy rate.
These developments within the economy coupled with high interest rates and the expected impact of the Domestic Debt Exchange Programme (DDEP) have put many SMEs in a difficult state.
In spite of these, the stronger a business is, the less likely it is to be affected by risks or unforeseen events. As a result, strengthening your business in times like these, does not just involve financial management.
It also includes strategies to retain and broaden your customer base, market your business affordably, keep morale high among your staff and improve business practices.
It also brings to the fore the need for SMEs to also look for opportunities to network and form alliances because these would help minimise their exposure to risks.
Surviving during an economic downturn as the situation is today, demands that SMEs must consider the following strategies.
Make your customers a priority
Generally, customer service is one thing many businesses never take seriously. Many SMEs in the country have extremely terrible customer relations and offer bad customer service.
But customer service is about providing customers with what they want, when they want it. If a business provides quality customer service, it is likely to retain the existing customers no matter how often prices change.
This also means a business has a greater chance of keeping and increasing its client base. This may mean pivoting the business towards new markets or products and services.
Making customers a priority in an economic downturn may also involve: running loyalty or customer incentive programmes; adapting products and services to be more suited to your customer's current needs; diversifying business to minimise potential damage from the loss of a significant customer.
In such tough times, it is particularly important to find ways to retain existing customers by providing good after-sales service so they feel some empathy.
Review your marketing strategies
In such times, it is also important to review marketing strategies. That can help a business come up with new ideas to increase sales and find better ways of using their marketing budget. One should focus on communicating a competitive advantage.
The business’ unique selling proposition should also help it to stand out from the crowd. Alongside this, it is important to develop strategies to measure the effectiveness of the marketing strategy.
Marketing a business can be an expensive exercise, and during an economic downturn it's especially important to explore free marketing tools available, including social media and word-of-mouth advertising. Note that, a trusted newspaper is also key in these times.
Consider staff management
Ensure there is an up-to-date human resources (HR) plan. Use that plan to detail staffing costs, which in turn will allow one to accurately cost products or services offered by the business.
Build morale and motivation by clearly communicating with the staff what is happening within the business. Try to involve them in decision-making and finding solutions.
During an economic downturn, it may be required for a business owner to change the staffing arrangements. If hours need to be reduced, try finding flexible solutions (e.g. you could ask some of your full-time staff to work a four-day week, or use job-sharing arrangements). If you do need to let some staff go to save money, make sure you understand your obligations for ending employment. Do not just act because retrenchment can have dire consequences on finances.
You may also consider training your employees to undertake more duties. One can conduct a staff skills assessment to identify the training the staff may need.
Conclusion
The present economic situation is not the first and will definitely not be the last. Adjusting to such conditions is critical to stay afloat and that calls for a 360 view of the business. It is also imperative to implement innovative ideas.
Equally important is for businesses to know that in such times, it is not only about doing big things, small things can also do the magic.