As 2023 proves to be a challenge for most companies, SMEs face the same hurdles – but often without the resources larger firms have to fall back on. 

This is the word from ProfitShare Partner’s CEO Andrew Maren, whose experience in banking, the FinTech sector and as a self-confessed “serial entrepreneur” has served to see him through tough times and start-ups.  

“Having taken the journey from start-up to success, the PSP team’s primary purpose is to help SMEs thrive,” he says. “While the headlines globally are not hugely inspiring, we put together a few of the issues SMEs are likely to be facing, and our suggestions for how to best deal with them.” 

Andrew Maren

Rising costs and reduced revenue 

Along with the cost of living, fuel and electricity prices have soared, along with rental spaces and office running costs. As SMEs are generally smaller operations, just downsizing staff-wise is not an option. How does an SME owner/manager keep costs manageable? 

  • If possible, downsize your office space, or share with another SME you know and trust. Where staff are able to work from home or on a hybrid basis, rotate staff members to enable desk-sharing.  
  • With winter coming, try using gas heaters rather than electricity (in between loadshedding). 
  • If any of your office equipment is rented, see if you can negotiate a lower rate or if you could be paying off your own equipment monthly. 
  • Encourage staff to save electricity and water – every cent wasted adds up. 
  • Even while cutting back where possible, keep your staff motivated and ask them what suggestions they have for cost-savings.  

Inflation ballooning 

According to Statistics South Africa, headline consumer inflation edged higher to 7,1% in March from 7,0% in February and 6,9% in January. “Headline inflation” refers to the change in value of all goods in the shopping basket.  

It is a measure of the total inflation within an economy, including commodities like food and energy prices, which are often volatile and prone to inflationary spikes. Globally, Forbes reports that many SMEs have increased their pricing, with one in three US small operations noting inflation as their biggest concern. 

However, inflation is always happening and SME owners need to be prepared for it. Some suggestions: 

  • Protect the money/cashflow that you do have by making sure you are getting the best possible interest rate on your cash. Shop around – even while it may be stressful, changing banks may be the answer if your banking costs are higher than other banks, or your interest rate is lower. Some banks may be willing to renegotiate rates if you have been a low-risk, valued customer. 
  • If you’re importing goods, make sure your bank offers a FOREX facility that enables you to buy products at a specific price on a specific date. While the exchange rate may fluctuate in your favour or not, you’ll still pay the rate you agreed, allowing you to budget. 
  • If you are able to hedge against inflation – which means investing in gold or other commodities; locking in wholesale price for good through long-term contracts; or taking out insurance against price increases. 

All of these methods take experience and good advice from a trusted financial advisor. You’d do well to discuss any banking changes with your bank manager or advisor as you may be liable for additional costs when closing accounts or altering your terms. 

Supply chain issues 

Problems in your supply chain can range from holdups in product delivery to suppliers demanding partial and even full payment for goods prior to delivery. What can SMEs do? 

  • When prices are on the rise and the economy is notably unstable, an SME who is able to, may save by buying greater quantities of the products you sell or require to conduct business. The hope would be that this tides you over until costs stabilise – or that you are able to raise your prices without losing clients. 
  • As it happened during Covid, ongoing market turbulence can cause even the biggest firms to slip up with their supply chain. Keep the lines of communication open with your suppliers so that you are able to create a Plan B. 
  • Even in steady financial markets, it’s a good idea to have more than one supplier on hand that you can deal with. This does not mean being disloyal to a long-time supplier – but in the event they are not able to service your account, your need to have a backup plan. 

“An SME owner should be reviewing suppliers and their customers regularly to keep up with what is happening in their sectors,” Maren advises. “Keeping your eyes and ears open, reading the financial press and having advisors looking out for you is all part of being a business owner. 

“Try not to get despondent, and keep your staff members’ morale up. Times have been tough before and they’ll be tough again. Those who make it through have the same entrepreneurial spirit that created ProfitShare Partners; a voice you hear that reminds you why you have your own business and that your success becomes others’ success too.”