There's a reason we're the Number 1 provider of part-time FDs

Call us on +27 861 127 280

Blog SME’s planning to survive

SME’s planning to survive

As you emerge from the ‘government life support’ phase of this COVID crisis and look to plan your future in an uncertain world, preparation is essential.

As we attempt to return to business as usual during what some commentators are forecasting to be the worst economic collapse in our lifetimes, businesses will need a clear strategy to help them emerge into what will, for many, be a very different landscape.

South African SMEs with a turnovers’ between R25Mil – R500Mil will be crucial in driving an “economic renaissance” and helping South African Entrepreneurs move forward with renewed vigor and resilience. SMEs are a key driver of our economy, often overlooked and not adequately represented in the way the bigger firms are. According to the stats more than 50% of the workforce in South Africa work in the SME sector.

Despite the various levels of government support available, irrespective of how quickly the COVID-19 situation improves, plenty of financial damage has already been inflicted on SMEs in one way or another.

It’s not just your balance sheet and cash, but a responsibility to the various stakeholders with whom you interact: your shareholders, employees, customers, supply chains and competitors.

Help, in the form of expert financial assistance, over and above financial support, will be imperative.

Such help can be split into three core categories; react, plan, and rebound.

 

React

Typically, SMEs are not strong at strategic planning, but this is something you cannot ignore. You will find that the world will have changed considerably, and your business will need to adjust accordingly. We are now coming to the end of the initial reaction phase, which has revolved around preserving cash and using the various government schemes to the maximum to secure your business viability for as long as possible. It has also been about negotiating with creditors and banks for as much relief as can be obtained.

Seeking professional advice at this stage is critical, particularly regarding short-term cash management, making the best use of government schemes and negotiating working capital facilities where required.

 

Plan

The coronavirus crisis is often dubbed as “unprecedented” with little or no data to predict future outcomes. Whilst the economy as a whole has entered into a recession, there are certain sectors who are suffering more than others, such as hospitality and tourism. Whilst some sectors are actually thriving, Economists are envisaging a lengthy recession and persistent high levels of unemployment with a lot of businesses not being able to survive.

To help guard against the worst of such outcomes, SMEs should be moving into the restructure, re-invent phase, where it is critical to involve scenario planning as part of your recovery plan.

Traditionally employed by large corporates, the disciplines and benefits of scenario planning are equally applicable (and beneficial) to small businesses. Simply by imagining different futures and outline planning for those outcomes – good, bad and somewhere in between – will help create tangible action plans for each possibility, which can then be rolled out when it becomes clearer just what that future pathway is shaping up to be.

We believe that SME’s need to ask themselves a few key questions. Amongst these should be:

  • Looking at end consumers, who will be buying? Will there be a lot of them or a few? What will they buy and through which channels?
  • Amongst our customers, which businesses will be able to pick up broadly where they left off and which will have greater problems (financially, operationally – e.g. staffing, etc)
  • Will all of our competitors still be around (not just the big ones, but the small ones, too)? And in what shape are they likely to be?

A new segmentation of markets will be critical – seeing customers not categorised by industry, geography or what they buy, but by whether they emerge as strugglers, survivors, or “escapers”

But it will also be vital to ask:

  • Will our supply chain be intact? And if not completely, what areas will be weak or gone? How might continuity of supply be affected? How might prices for materials look compared with now?
  • What illness disruption might we face amongst our workforce and are we doing enough to protect our staff?

 

Rebound: Critical success factors 

Well prepared, SMEs will be able to recover faster, particularly when a clearer economic picture emerges towards the end of 2020 and into 2021.

In the meantime, small businesses should identify from their chosen strategy the set of critical success factors (CSFs) that will impact their ability to recover, pivot and prosper, before translating them into a core set of dynamic KPIs that tell how well the business is doing achieving these. And keep all of your employees updated with your decisions, and the progress being made to maintain their engagement.

By getting to grips with KPIs such as forward cash, customer retention, working capital management and supply chain resilience, there is nothing to stop a well-prepared SME from not just surviving the current economic and societal afflictions, but thriving.

If, after reading this you’re feeling uncertain about the business plans you have in place, and would like to get a better grip on what the future might look like, The FD Centre is offering a complimentary 90 minute Planning Session with one of our top notch CFOs. In this session you will receive help building the structure of your “bullet proof plan” to come out of 2020 leaner, sharper and stronger than before.

 

The FD Centre has helped hundreds of businesses emerge through this pandemic more resilient.

Please click here for more info, or to book your Planning Session:

https://www.fdcentre.co.za/future-proof-your-business/

Written by Nick Crawford and John Paterson

fd-heart

Book in for a free financial health check

Book Now
fd-stars

Rate your company finance function in nine minutes

Take The F Score
fd-speech

Do you have a burning finance question? Ask one of the country’s top FDs now

Ask The FD
fd-money

Book yourself in for a complimentary 30 minute finance breakthrough session

Book Now