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Nurture Your Survival Instincts
Taslima Khan
Jan 2009
Jan 2009
Page 1 of 2
These words from Napoleon Bonaparte best underline the strategy Small and Medium enterprises in the country must adopt to stay afloat in the flood of recession. SMEs need to prove themselves the fittest entities for them to survive the storm.
The small and medium enterprises are the worst hit in any downturn. This is attributed to their vulnerability to economic pressures owing to several reasons. Here's why the SME sector is the hardest hit in the current downturn-
• A major chunk of the MSME sector is dependent on export markets. In the current recessionary situation, export markets in the developed countries have contracted to a precipitous degree leading to loss of revenue for the enterprises. Volatility in the currency markets further affects the risks attached to exports.
• SMEs are also losing competition to imports which is intensifying by the day. Their woes seem unrelenting as they have to bear the brunt of defaults and deferred payments from large corporates and other miscellaneous buyers of SME products and services.
• Finance is the most pressing problem for startups and established players alike in the SME sector. Small entrepreneurs are doubted for their credit worthiness in normal times. In recessionary situations, banks and financial institutions turn risk averse which leads to all sources of credit drying up and the entrepreneurs find themselves strangled.
For an average entrepreneur the downturn may mean gloom and doom with no end in sight. But for the outstanding, its means converting challenges into opportunities. SME World presents a few essential tips for those 'Small' businesses who want to make it 'Big' despite the tough times.
Invest in meticulous planning:
Invest a considerable amount of time in planning your moves. For this you will need real time business updates. Keep yourself abreast of the current developments in your business area. Forecast the situations you would have to confront in the near future, and also in the long term. Plan your moves meticulously to respond to all the ideas and opportunities.
Reassess your business strategy:
A down turn is a time when you would be required to rethink your business strategy as well as your business model. Your business model has to be re-engineered to develop resilience to the current economic climate and also to prepare effectively for future recovery.
You may need to adapt your business plan to the need of the hour and this may entail answering certain pertinent questions. Which target markets and which clients have been affected the most? Which input costs have gone up and by how much?
Customer is King, Even in Recession:
Remember and appreciate the fact that in a recession a customer's ability to spend may be curtailed but that doesn't mean his expectations have also changed. The management may be preoccupied with managing finances. Further some may consider the futility of focusing on customer needs as customer loyalty during a downturn is a major casualty. But few acknowledge the fact that compromising with product quality or customer support services can be no less than suicidal. You may be giving way to a struggling competitor.
Cost-cutting and Flexibility are the new Mantras
Improve the productivity of your enterprise. Streamline your processes and spruce up your business. Cut the costs incurred on traveling, telephone, newspapers etc. Improve efficiency by automating certain processes that take too much of your valuable time. Decide upon which functions to concentrate on and which ones to be outsourced or stopped altogether.
Outsourcing certain functions gives you further flexibility to reduce your expenditure. It also gives you access to the best practices. Outsourcing may also be helpful if you are planning to cut down on your staff. A viable way of reducing costs may be to reduce expenditure on employment agencies. The inbuilt career section in your website may enable online hiring which will be much economical.
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