Adjustments That Can Help Your Small Business Stay Afloat
Three months ago, a men's chama invited me to facilitate its weekend team-building retreat in Naivasha. Members of the chama run small businesses in Githurai, and they each employ between 5 and 23 people. Among them are owners of hardware shops, bars, restaurants, barbershops, mini-markets, and bookshops.
They planned the weekend retreat to bond and have fun together, but they set aside one afternoon to share experiences on how their businesses were coping with an ailing economy.
Some said their sales were declining, others said they were experiencing cash flow problems, but all agreed they had to adjust.
"What kind of adjustments?" I asked.
Here is some of what they said:
If revenues are dwindling, customers are not paying, or you are struggling to pay suppliers, it's time to tighten your belt. Accepting that all is not well will help you respond quickly and effectively.
A depressed economy takes three to five years to recover. Since you don't know how long the current cycle will last, prepare for the long haul.
Don't quit. Businesses that stay afloat during hard times have a head start when the economy improves. If you can keep your vessel afloat, it'll be easier to sail again when the storm subsides than if you allow it to sink.
Learn from others
A bad economy affects everyone. Find out what others are doing to stay afloat, and see if you can borrow some of their strategies.
Keep accurate data
Track your business's performance, costs, and profitability from day to day, and use the information to guide your minute-to-minute decisions.
Rent is an ongoing expense, and you have to pay it even if your business is struggling.
Move to cheaper or smaller premises to reduce your overheads and free up cash for working capital.
If your services or products don't require customers to come to your premises, give up your office space and work from home.
If you have two or three shops, consider consolidating all your operations in one shop; but think of how you'll continue to serve the customers of the closed shops. Explain to them why you have scaled down and let them know you want to continue serving them.
Put your business online
Depending on the nature of your business, putting your business online can help you operate without the overheads associated with renting premises.
Protect your cash flow
It is the lifeblood of your business, and, without enough of it, your business will grind to a halt. Insist on cash-only, and if you must give credit, it must be to creditworthy customers.
Don't give credit to government institutions
This especially applies to county governments. They often don't pay, or they take very long to do so. Before you accept orders from government institutions, think of what would happen to your business if they didn't pay.
Don't put all your eggs in one basket. Introduce new products and discontinue slow-moving items.
Cut down on salary expenses
Negotiate with your staff to accept pay cuts. Explain to them that it is a temporary measure meant to help you ride the storm.
Lay off some staff
If you can't pay them, don't keep them; but help them transition smoothly to a life without a regular job.