By Mark Cant, Enterprise Consulting
The pressure to invest is growing amongst many companies. Productivity is stagnant. Growth is proving difficult with near zero inflation. And entrepreneurs, buoyed by renewed confidence, want to be bold and see their businesses grow and make more money. They are bored of battening down the hatches.
However, according to a recent survey from BDRC Continental, almost half of all SMEs refuse to borrow money, preferring instead to pay down debt or remain debt-free. So, short of new equity or disposals, companies need to make more money if they are then to re-invest.
Cutting employee costs is one way, but with small and medium-sized enterprises (SMEs) struggling to fight their corner in the war for talent, that can be short-termist and for a family business, often the antithesis of what they are all about. So other measures need to be looked at.
Here, in no particular order, are some ‘easy wins’ that can help companies on their path to growth:
1 – Look for products that you should sell but currently don’t to your existing customers – known as cross-pollination.
2 – Ensure you consider each customer’s profile and ability to pay – some may be more likely to pay higher prices for your goods. However, in raising prices, don’t risk alienating your core customer base.
3 – On product delivery – increase delivery costs by a small margin.
4 – Start stamping all invoices with ‘Payment within 28 days’ – do nothing for three months and then start to chase to these terms unless contracted.
5 – Flex prices for your lowest selling customers to assess their sensitivity to price changes.
6 – Look at your social media impact compared to competitors. Improve it. One family outdoor clothing business recently sponsored a famous sportsman with 1m followers on Twitter, but not once had that sportsman tweeted mention of their brand. Once he did, the effect on their sales was instant.
Reduce your costs
1 – Take the last 30 items purchased and look at reducing the price of your next order by 10 percent through consolidation, alternatives or simply making a call to your supplier to say you are looking to reduce costs.
2 – Outsource activities such as bookkeeping, IT, HR and marketing. This gives SMEs the flexibility to adapt to changing environments. This strategy can be risky when subcontractors behave opportunistically, so make sure you outsource to people who share the same ethic and work approach as you.
3 – Watch for suppliers over-charging. Reduce future costs and secure refunds. Many organisations will do this for you on a commission only basis, especially with utility and energy contracts. Other categories where charging outside contract terms is prevalent is in media buying and advertising, distribution and facilities management.
Finally of course there is your people. There is a whole array of actions, from getting staff to drive profitable growth to cutting out recruitment agency fees – worth of a separate piece altogether!
In the meantime, if you take the above steps, then your bottom line should improve by at least 20 percent – simple!