Lagos Chamber of Commerce and Industry (LCCI) say operators of Micro, Small and Medium Enterprises (MSMEs) in Nigeria had better review their business model to reflect prevailing realities and consumer preferences.
Mrs. Toki Mabogunje, LCCI President, made the call at a virtual Global Leadership Training, themed ‘Playing to your Strengths: How to Position and Thrive as an SME in Tough Economic Times’.
“There is perhaps no better time to focus on business survival in challenging times than now, and I advise micro, small and medium-sized business owners to strategically position themselves for continuity in this challenging period and brace up for the challenges ahead.”
Looking specifically now at Small and Medium Enterprises (SMEs), it is particularly important for us to know that amid these challenges and uncertainties in the global and local economy lay unexploited opportunities.
“Identifying, utilizing and leveraging these vast opportunities require business owners to be visionary, farsighted and futuristic in their approach. Business models have to be reviewed to reflect prevailing realities and consumer preferences.”
Incorporate technology in your operations
Traditional business models are losing relevance and facing increasing challenges of competitiveness given the fast-changing dynamics in today’s business environment. It is imperative that SMEs adjust their business models in line with current realities while ensuring such models are technology driven.
Flexible Management Approach
Adopt a flexible management approach to keep tight control on cost and non-revenue-generating segments of your business. Flexibility helps business owners to adapt to dynamics. SMEs can free up liquidity trapped inside the business to increase their chances of survival and improve resilience and sustainability. SMEs can do this by introducing cost reduction measures, negotiating new terms with input suppliers and service providers, reviewing portfolios of receivables and offering discounts for early payment to large buyers.
Supply Chain Review
SMEs should reconfigure their supply chains possibly through backward integration for inputs that could be sourced locally. Practice import substitution to wean the business of imports, where applicable, and mitigate the risks which arise from global supply chain disruptions. Frequent and frank communications with suppliers, customers and service providers such as transport companies and banks will determine whether an SME can ensure business continuity. By having control on significant portions of the supply chain, SMEs can bring down costs while ensuring improved efficiencies in operational activities.
Maintain healthy cash flow
As the saying goes, ‘Cash is King’, cash flow is the lifeblood of any business. To ensure the business is healthy, SMEs need to keep an eye on their cash flows. Besides the objective of generating more sales which leads to greater increase in cash flows, you must know how to manage cash. This handy skill ensures you maintain a consistent cash flow which will result in a healthy cash balance.
Prioritise main competencies
It is important for SMEs to focus on their core competencies to strengthen their competitiveness. Business owners should not get involved in too many things or products to avoid being thinly spread and possibly losing focus. This can damage the core business by taking valuable time and resources and putting them into less important activities. Your brand and reputation could be affected. Identify your core business and focus on it.
Capitalize on existing customers while chasing new ones
There is a saying that a bird in hand is worth two in the bush. Your existing customers are an opportunity to make more sales without the extra costs of soliciting for new customers. Some of your existing customers, especially the loyal ones, provide more sales opportunities. While striving to have more customers and expand your clientele base, never stop giving your best to your existing customers.
Do not cut back on advertising &marketing
During tough times, many SMEs make the mistake of cutting their marketing budget. It is during tough times that consumers are restless and contemplating adjusting their buying decisions. This is the moment to help them find your products and services. Therefore, do not quit marketing, instead step up your marketing efforts. Use technology. Engage in digital marketing.
SMEs should keep abreast of the latest developments and related information in their respective industries. Such information is critical to business planning and strategy and could further enable the business to take quick advantage of new opportunities in their sector. Information also helps the business make projections on several parameters such as profitability, cost efficiency and competitiveness.
Manage your inventory cost
SMEs must regularly review their inventory management practices. Look at what can be done to reduce inventory cost without compromising on the quality of goods or inconveniencing customers. Could an item be purchased from another supplier at a better price? Are there alternatives that could help reduce costs? Is any item overstocked? You do not need to keep ordering certain items from a specific supplier or do things in a particular way. If a different alternative could save you money, why not do it differently? During tough economic periods, it is always advisable that business operators assess their supply chains and create alternative supply sources.