Savings Month: What business owners can do

By Shawn Theunissen, founder of Property Point and Craig Gradidge, CEO of Gradidge-Mahura Investments

Savings month
Photo by Micheile Henderson on Unsplash
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This year’s commemoration of Savings Month finds entrepreneurs in a difficult position. Small business owners continue to bear the brunt of intermittent lockdown, reduced economic activity and an already stagnant economy.

“It is those businesses that are compliant and manage cashflow wisely that will keep standing. The small business assistance programmes launched at the beginning of the pandemic were completely oversubscribed from a wide array of industries and business sectors. Therefore, small business owners, sole proprietors and independent contractors have to do everything in their power now to ensure they can be sustainable during this crisis,” says Shawn Theunissen, founder of business accelerator Property Point. Via it’s Entrepreneurship to the Point (ETTP) platform, they have partnered with financial services company Gradidge-Mahura Investments to advise business owners on wealth management and savings, which could be the crux of surviving the rest of 2020.

“Even good businesses are at risk of going under. Companies that were on their knees before COVID-19 hit were unable to survive. Companies with weak balance sheets saw lenders closing the taps,” comments Craig Gradidge, CEO of Gradidge-Mahura Investments.

They offer these five money tips for SMEs:

  • Prudent money management

Prudence is always about knowing one’s financial position (for example, how long can the business continue if it did not generate any revenue). Business owners must comprehensively assess their financial position and the impact of the lockdown on the business to ensure they fully understand their financial position.

This review should include your cashflow and establishing when money is coming in and how frequently, as well as how much of it is tied up in stock. You need to see where you can cut back on expenses in order to build up liquidity and reserves to sustain your working capital requirements for up to 12 months.

Owners must also assess the credit and debit facilities they have in place to cover expenses during this time.

  • Judicious use of debt

Debt is a critical component of an efficient balance sheet and can enhance shareholder returns quite significantly over time. However, long periods of prosperity can lead to over-confidence on the part of management when it comes to borrowing. Debt must be sustainable through all phases of the business cycle.

Likewise, business owners must also exercise prudence in their personal finances. Realise that debt is costly as interest rates make payments more expensive than the value of the item. With that in mind business owners must practice good financial management by seeking to pay off personal debt starting with the smallest outstanding balance​ to the biggest, then adopt the habit of setting financial goals and objectives​ and drafting and sticking to a budget.

  • Taking difficult decisions early on

Entrepreneurs tend to be optimists. Times of crises calls for realism and an appreciation that the odds of the worst-case scenario materialising have increased. It is important to protect the business. It is easier to rehire people or reopen branches than it is to restart a failed business. ​

  • Protect what is important to the long-term sustainability of the business

It is important that businesses understand their core business and what needs to be protected in times of distress. Some prominent companies are going to come out of the pandemic with egg on their faces as customers observe their less than desirable behaviours (price gouging, rent boycotts, poor labour practices) during the crisis. For many companies, the strength of their brand is a critical part of their ongoing success.

  • Be flexible and agile enough to change course when necessary

Some crises can have long term implications for businesses. To survive, business owners will need to develop short to medium term strategies to stay afloat. They must think clearly about how they are going to navigate the COVID-19 crisis. Management needs to be flexible and know that a crisis can bring out the best in a company.

There will be opportunities, but it will depend on the business’ capabilities. Owners must assess whether their value proposition remains relevant during this time and try to plan ahead where possible. Entrepreneurs will have to be forward-looking in their strategy and may have to consider market diversification. However, businesses must be careful not to over-extend given that when the situation returns to normal, but even if it does not, they are able to keep up with the demand of their core business.

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