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SURVIVING THE ECONOMIC DOWNTURN: ADVICE FOR SMEs.

Everyone across the UK is starting to feel the effects of an economic squeeze with the price hikes, escalating fuel costs, lower house values and increasing redundancies. Small businesses are particularly feeling the pinch particularly since cash strapped businesses are holding back payments to small companies. But there are measures small and medium-sized enterprises (SMEs) can take to help survival over the next few years. It could well be time to review your processes and procedures. Outlined below are some areas that SMEs should be considering.

Focus on your customers:

As the economy slows, existing customers may not buy from you as frequently as before or as much and new customers will be harder to find. Your sales turnover will come under pressure. In times like these you might consider to cut down on your marketing budget but you should resist cutting back on your marketing as you need to make sure that potential customers still know about you.
When budgets are tight, existing customers are more valuable than ever. It is easy sometimes to take existing customers for granted and concentrate on new and prospective ones. But customer loyalty should never be taken for granted: it comes into its own when times are hard and existing customers are the ones that often refer your services to others. The key is to focus on existing customers and see how you can improve the services you provide to them.

Maintain good supplier relationships:

It is important to have good relationships with your suppliers as you are dependent on them in order for you to provide services to your clients. Check the way you do business with your suppliers – it could be costing you more money than you think. Remember you don’t always have to accept price rises. It may be worth negotiating or suggesting staged increases.
You should look at your costs rigorously as well. Can your utility bills be reduced by switching suppliers? Are you incurring travel costs unnecessarily? Look at each line critically - you will probably be able to make worthwhile savings without damaging your business. 

Be aware of your finances:

In this current situation, it may be that your debtors will be slower to pay, and your creditors will be pressing you for payment. Your cash flow is likely to come under pressure. Review your projections and remember that the likelihood of bad debts will rise: make sure your credit references are up to date and your debtor control operation is sharp.

Maintain a good relationship with your bank:

If you have got a good business and a good business plan, which recognises the risks you face and builds in sensible contingencies, the banks will look to work with you. There is nothing worse for your credibility than ringing up in a panic for an emergency rise in your overdraft. If you keep the bank advised, you are likely to find them much more constructive if you need to call upon their help.

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