The global economic outlook for 2020 is looking dismal, thanks in part to the ongoing COVID-19 coronavirus outbreak which shows no signs of being resolved anytime soon. While larger businesses might be able to weather the storm, the SMEs of the world remain incredibly vulnerable to the disruption in business caused by the virus.
Fortunately, there are precautions that SMEs can take in order to at least mitigate the worst of the issues that might follow the economic downturn. Despite a lower forecast for economic growth globally, challenging local trading conditions owing to the inconsistent power supply, currency volatility and rising operating costs, opportunities still exist for the most agile of SMEs.
Here are a few tips that SMEs can utilise to mitigate damage to the business under strenuous circumstances.
A cash buffer can help a business to take advantage of opportunities quickly, survive unexpected knocks and remain competitive when the price can be the difference between winning or losing market share.
Since speed is the primary advantage of SMEs, it is a good idea to move inventory into buyer’s hands quickly. Collect on receivables quicker and reduce operating costs to free up the cash saved in the bank for investment in the right opportunities as they arise.
Even in times of poor economic performance, there are still markets where opportunities exist. Identify these markets and tailor your offering to meet previously under-serviced markets. Know what customers are willing to spend money on and service that deliberately.
Use Debt Funding Wisely
lower economic growth typically paves the way for a lower interest rate environment, where appropriate, take advantage of this for investment expenditure that also reduces your business’ reliance on external power and water supply.
Protect Cash Flow
Avoiding extended cash shortages are one of the most important day-to-day tasks that need to be managed by an SME. Try to maintain steady cash flow and consider opening a line of credit to fund short-term problems.
Keep Existing Clients Happy
Chasing new market opportunities is good, but maintaining standards to keep existing clients happy is just as important. Especially during a rough economic outlook, having good relations with clients and customers means that your business will be the first one they turn too.