Article by Mike Shorten (Simplify TOM)
Global markets are being rattled. We see a belligerent President Trump instigating trade wars with, amongst others, China. There is a saying that when two bull elephants fight, it’s the grass that gets trampled and destroyed. Your business is the potential “grass” in this example! How do you prepare your business to survive any fallout from these trade wars?
Unfortunately, it is very difficult to predict what industries are going to be impacted. Some are obvious. I would not like to have a business directly reliant on Huawei products at the moment. Many other impacts are not so obvious. For example, some businesses might find it more difficult to find supplies, there could be a flooding of product once destined to the US on local markets, or there could be an increase in tariffs if you are an exporter.
But is there any real impact on South African businesses? The Governor of the Reserve Bank, in his recent announcement to hold interest rates, says that there have already been negative impacts on South African businesses. On the positive, other local businesses sees opportunities once the uncertainty around the trade war has settled.
Let’s assume that your business could be negatively impacted. So what can you do about it? Below are a number of actions, extracted from the SimplifyTOM tool, for you to consider in preparing for a negative outcome:
- Review your business value chain from sourcing of suppliers to sales and customer service and determine where you could be impacted:
- Will you have continued access to your suppliers with the same price and terms?
- Do you need to change your products and services offering?
- Will your distribution channels be impacted?
- How will your sales be impacted?
- Review your cost structures and determine where you can cut costs – especially where you can reduce your overheads. Consider putting capital projects on hold.
- Do you closely monitor your sales trends? Do you know your bottom sales level before you go into loss? Are you prepared to take quick action should your sales start trending downwards?
- Look at how you can increase sales:
- Seeking customers – are you generating sufficient leads from advertising / networking / promotions, etc.? Why not? What new customers can you attract? What new markets can you serve? Review your marketing strategy. Is it still relevant? How can you change it?
- Stimulating customer interest – are your products and service appropriate for the market? Do customers realize precisely what you are selling? Conduct an objective review of your products and services. Compare them to your competitors.
- Satisfying customer needs – Why do your customers buy from you? This is not why you think they buy from you but rather their real reasons for buying from you – ask them. How can you improve customer loyalty?
- Improve an underperformer – Take one underperforming product or service and determine how you can improve its sales performance. Involve your staff and customers in determining any actions.
- Improve your selling – Are your sales techniques working? Do you need to retrain your sales force?
- If things start getting tough, keep your bank informed of the situation especially where you have an overdraft.
- Keep paying your creditors but especially your suppliers.
Mike Shorten has more than 30 years’ experience advising and mentoring businesses varying in size from small entrepreneurs to large international companies. He has developed a simple but effective task orientated business advisory tool to help you improve your business’ performance. This article is a modified extract from a section of the tool. If you like what you have read and want to learn more, go to www.simplifytom.com.