While President Ramaphosa has expanded on an impressive five-point “package” he hopes will stimulate economic recovery to thwart the recession, current economic realities still spell bad news for business owners. Policy uncertainty has knock-on effects on investment and the rising cost of living means consumers are struggling to make ends meet. The question is, can local businesses do anything to mitigate risk and attempt to recession-proof their businesses?
Jannie Rossouw, Head: Sanlam Business Market believes they can. “While it is hoped that next month’s mid-term Budget will see the announcement of structural reforms to reduce the cost of business and living, there are also steps that business owners can take to steer their businesses through the current challenges and rise to Ramaphosa’s plea to only resort to retrenchments as a last resort.
Rossouw suggests taking a step back from the business and making key strategic decisions. Some are simple and others may require more time to implement, but having a clear view on business finances and a conservative plan is an empowering start. He suggests the following:
· Assess staffing needs: rather than retrenching staff, think about decreasing employees’ working hours by implementing a 2/3 shift policy or appointing a commission-only sales team. This might be a temporary measure, but could help keep your staff employed while ensuring the business remains sustainable.
· Trim unnecessary costs: examine business expenses and cut back where you can – entertainment, end of year functions, subscriptions – decide what are ‘nice to have’ and not essentials.
· Focus on clients: it’s cheaper to retain an existing client than win a new one so do what you can to build customer loyalty and secure consistent sales.
· Plan for the next challenge: once business is looking up, it’s important to plan ahead because there will be other obstacles to navigate. Plot out the key financial risks for every phase of your business’ lifespan and ensure that adequate financial cover is in place. Try not to make the mistake of cancelling vital protection solutions – like medical aid – to plough more funds into your business. If you do get sick and have no cover, exorbitant medical bills can be catastrophic for your business.
In South Africa, we are in dire need of economic growth to stimulate the business sector to flourish, expand and create much needed employment opportunities. SMEs are estimated to represent 34% of the GDP contribution in South Africa and are also a key employer – proof that business owners both big and small play a critical role in the economy. Rossouw concludes that Ramaphosa’s plan for recovery is hopeful, especially given its employment and SME upliftment focus.