Singapore economy is projected to expand by only 1 to 2 percent this year, the lowest growth rate since 2009. Many companies were forced to cut back on their operations as well as their workforce.
“About 42,000 businesses were shut down in the first six months of this year, compared with 49,000 over the whole of last year. Minister for Trade and Industry (Trade) Lim Hng Kiang told Parliament earlier this week that a recession is unlikely to set in, but the possibility that the Singapore economy could see some quarters of negative growth cannot be ruled out.”
Below are some actions that SMEs can take to survive in a slow economy.
1. Tweak operations to increase efficiency and reduce costs
Take a look at operational process, are there any process that is non-value added and can be removed? Are there any processes that can be done in a more automated way? There are many online solutions that can help your business increase productivity and reduce costs, from accounting, inventory management to HR management. Many of these online solutions are free!
In a situation where headcount reduction is required, it is pertinent to identify the positions that can be eliminated, rather than identifying specific employees. This will help the process to be carried out in a fair and objective manner.
2. Solid communication plan for your employees
In this period of uncertainty, it is highly advisable to regularly communicate the company’s current performance and current financial position as well as its future plan in dealing with the slow economy. Such proactive action will go a long way to boost morale and win employees’ acceptance of any future changes. For example, reprioritising products or reformulating new sales strategy requiring relocation, transferring and retraining of employees.
It will also eliminate any grape vine rumours which are usually very detrimental to employees’ morale and productivity.
3. Keep in touch with prospective customers for potential future sales
It usually will not provide the immediate sales right now, but when the economy starts to grow again, and when this prospective customer wants to offer a contract, you want to be at the top of his calling list.
4. Keep focused on customer service
Your business must have a very strong focus on excellent customer service. Ensure that you don’t lose your existing customers to the competitors. This will especially help you stay afloat during difficult times and also build a stronger relationship with all your customers.
5. Don’t say no
During the tough times you should consider taking on projects that, during normal economic times, the Company would not be interested in. These are usually small scale projects which, in such times, will go a long way to keep morale high and will help with the cash flow. This also will help with the future sales when the economy turns around. Providing deals and discounts in order to win new customers or new projects may not be a good idea as it will not be sustainable and these customers may expect to always enjoy the discounts given. It can also shift your product image as well.
Discounts should only be given for the purpose of building a relationship with long-time customers to further build customer loyalty.
6. Regular forecast and management of cash flow
In a slow economy, revenue inevitably will decline and payments could take an extra longer time sometimes even double the amount of time to collect. Every business is holding tightly onto their cash as banks are shrinking lending. It is vital to take a long hard look at your financials and cash flow forecast so that you are able to make an informed decision of what needs to be done.
- Are you spending and wasting money in certain not crucial areas? For example, can an overhead like office rental be reduced?
- Any future plans that can be postponed? For example, reviewing an expansion plan as it may have been feasible when it was envisaged years ago but may not be feasible in the current circumstances.
- Which product or service is bringing the company the most profit margin. How do we increase that?
- Do we have enough cash flow to sustain? If not, what are the alternatives? Invoice trading is one of the mechanisms to help businesses turn asset (accounts receivable) into cash to help the business survive.
- Are your customers paying on time? Does the collection process need to be tightened up?
- Chia Yan Min, ‘How a slowing economy affects companies: Businesses gear up for more tumultuous times’, Straits Times, 14th October 2016