RISING COSTS, RISING CHALLENGES: 6 THINGS TO STAY COMPETITIVE AS A CREATIVE SME OWNER

Without a doubt, SMEs are keeping up in one of the most challenging conditions in decades at the moment. Many SMEs have been severely impacted by inflation, forcing many of them to either shut down operations or completely restructure in order to comply with the pandemic’s constraints. We are currently witnessing a struggle on a daily basis to keep the lights on.

The extreme inflated fuel price fluctuations in recent months have also negatively impacted businesses in particular SMEs. For enterprises that depend on transportation to move their goods, the price of petrol has been terrible, peaking at over N1,300 per litre in August 2024. The increasing cycle of increases in rates also make it even more difficult for SMEs to get funds or pay off debt.

YES! THESE ARE THE COST OF DOING BUSINESS.

But what can be done?

“SMEs currently face extremely difficult operating conditions, and they are not expected to get any easier anytime soon. SMEs must return to their core values, provide excellent customer service, take use of all digital opportunities, and minimize overhead. Although it’s not simple, it is possible if you have the correct mindset, actions, and partners”

Making the correct mentality of prioritizing customers and services while minimizing expenses will be key.

Here we set out a few significant recommendations.

1. Understand income and expenses

First and foremost, all SMEs, regardless of size, need to have a precise money inflow and outflow projection. Costs must be exceeded by expenses, and SMEs are supposed to turn a profit on top of that.

Take into account everything that needs to be paid for, including salary, electricity, rent, cars, office supplies, data, and so forth, and compare it to your monthly revenue. Naturally, monthly turnover varies, thus cutting expenses to the absolute minimum is essential to avoiding costly debt.

2. Have an exclusive bank account

Many small and medium-sized businesses (SMEs), particularly those that are just getting started, receive their income and pay their costs from personal bank accounts. It is not recommended to do this. It will be difficult for you if you have employees who need to make payments or register for VAT, in addition to the fact that a financier cannot discern between personal and non-personal transactions, which could impact your capacity to obtain finance in the future.

It would also be difficult for your accountants to distinguish between personal and corporate expenses. To guarantee that your personal and company transactions stay apart, it is therefore imperative that you register a business-specific account as soon as your venture launches.

3. Prioritizing core activities

Simplifying operations is a crucial tactic for cutting costs.

As a creative SME owner you should streamline inventory management, automate procedures when it can, and eliminate pointless operations so that they may concentrate on your core competencies, which are critical to the success of the company.

For example, utility expenses could eventually be decreased if you invest in energy-saving technologies like LED lighting or more energy-efficient power systems. It helps on the long run to determine these less costly efficient inventories that could benefit the business and protect it.

4. Utilising technology

Numerous opportunities exist for cost reduction with technology.

The need of costly on-premises equipment can be avoided with cloud-based systems, and operations can be made quicker and automated with software optimization.

Robust safety measures are also beneficial since they shield the company from expensive security lapses and interruptions.

5. Offer only the best

Quality service is something that will never go out of fashion. Small and medium-sized businesses (SMEs) that prioritize creating a first-rate customer experience—from answering calls or emails promptly to delivering their products on schedule—will benefit greatly from recurring business and recommendations.

6. Raising prices – Without losing customers

Small business owners may have to make the tough choice to raise pricing in order to maintain operations as costs grow. Even though price hikes are frequently required, they must be handled carefully to prevent upsetting devoted customers.

• Be Open and Honest in Your Communication
  Notify customers of the reasons for the price increase. Tell the truth about how your company’s costs are going up, whether it’s because of escalating labor prices, inflation, or greater material costs. Being open and honest fosters trust and enables clients to comprehend the reasoning behind the modifications.

• Add value not just cost
  Consider improving the customer experience or adding value to your goods or services if you’re planning to raise prices. This can involve creating loyalty reward programs, connecting services or providing even more better customer service. If a customer feels they are receiving more for their money, they are more willing to accept a price increase.

• Implement Gradual Increases
  Consider making small, steady price increases over time rather than a sudden, drastic one. Customers may find the change less abrupt and have more time to get used to the new prices as a result.

• Provide Options or Leveled Pricing
  Give clients options by offering levels of pricing so they can select different product versions or service levels at different price points. Customers can choose what best suits their needs on a financial level and still do business with you in this way.

• Target new customers first
  If at all feasible, start charging the new rate to new customers while maintaining the previous price structure for a predetermined amount of time for existing customers. In addition to compensating for increased expenses with new customers, this can aid in keeping current customers happy.

• Keep an eye on competitors
  Pay attention to the price strategies used by rivals. Customers might be more open to your price increases if the business as a whole is modifying its prices as a result of growing costs. But you might have to change your strategy if you’re much ahead of your rivals.

Stay afloat in a rising economy – Recession-Proof your SME

When things are tough for your small business, it’s critical to stay composed.

All things considered, these six excellent, tried-and-true HR tactics can assist you in beginning the process of developing a strong business plan that can withstand any adversity. However, as with any company plan, it’s critical to keep in mind that “one-size-fits-all” approaches are rarely effective.

In the end, you need to be innovative, flexible, and prepared to think beyond the box if you want to recession-proof your company.

It is imperative that you evaluate your own circumstances and utilize these tactics as a foundation for crafting a customized, recession-proof company plan that meets your requirements.

Wishing you luck!