The almost-post-pandemic business environment offers small and medium enterprises (SMEs) several challenges and some big opportunities. As usual, long-term success is a function mainly of a company’s ability to read trends and come up with ways of riding them. It’s vital that they do, given that SMEs play such an outsized role in Africa’s economies — an estimated 80% of the workforce in both the informal and formal sectors is employed by larger SMEs, in the turnover range of R15m-R500m. The many smaller SMEs also play a key role and provide the personnel for the next generation of larger SMEs.
It’s unfortunate that these companies are often the least resilient, with limited cash reserves, less solid client bases, and a shortage of skills to manage commercial pressures and adjust their strategies to changing circumstances. It goes without saying that this sector has been badly affected, not only by the loss of business caused by the Covid-19 lockdowns, but also by the changing business environment of changing workstyles.
In short, the SME sector as a whole has a massive role to play as an engine of growth and employment, but it is uniquely vulnerable. It is clearly in everyone’s interest that SMEs are helped to prepare themselves better to trade profitably and respond to change.
Focus on saving and managing spend
Cash, and particularly cash flow, are key in any business; they present a particular challenge for SMEs, which often exist on a hand-to-mouth basis. A key first step is to develop a culture of saving throughout the business. Many tools exist that make it easy for SMEs to save money without destroying muscle, so to speak. For example, marketing and tax assistance, as well as financial and legal advice can be vital at certain times, but are simply too expensive to have as in-house functions.
But a little smart thinking can do wonders in locating service providers who offer such services as an added value service. For example, some leading insurance companies offer their clients access to these kinds of services, with competitive pricing for more complex or protracted matters. Think of it as outsourcing in a box, and it can be a way for an SME to level the playing fields somewhat when competing with larger companies.
Finances and financial health are obviously critical in any business, and specialised service providers can help SMEs put their financial affairs onto a sound footing and save capital, which can then be ploughed back into the business. In particular, properly drawn up financial statements are prerequisites for accessing funding from banks or grants from donor agencies to underpin growth.
Get the right technological help
Technology is the great leveller, and SMEs must learn how to use it effectively to put the wind under their wings. We all know that digital technologies increasingly enable business processes and payments, and also provide new ways to reach customers — what fewer recognise is the importance of having technological help available at short notice. The cloud offers a solution to all this, offering technology needed as a service and at a reduced cost, and provides the technological support that every business needs at times in order to keep its doors open.
A smart, cloud-based approach to technology also gives an SME much greater flexibility to respond to changing market or business needs. For example, the shift to working from home/hybrid workstyles is much easier for an SME to deal with if its technology platform is cloud-based. By the same token, a cloud-based SME is better positioned to address new market needs because it isn’t constrained by legacy technology investments, and can simply take on and discard services very easily and with no capital outlay.
An important additional point is that a large percentage of employees would prefer a hybrid working environment that melds office- and home-based working — 72%, according to one study. Being able to offer this is clearly an important element in winning the war for talent. Other elements include coaching and mentoring employees to reach their full potential and developing policies to help employees strike the right work/life balance.
Technology lies behind most of these solutions, but SMEs should be clear that it is simply an enabler of the strategies that they develop. SMEs can — and must — prosper for the economy to recover.