When done right, an acquisition of another business can advance the other paths to growth in a fraction of the time
By Washington Mashanda
The global Covid-19 pandemic has had a negative impact on Small, Micro and Medium Enterprises (SMMEs) and many are faced with the prospect of not reopening post the lockdown restrictions due to the domini effect arising from their respective value chains. The tourism sector is a good example where the SMMEs tend to be at the bottom of the value chain and as the global companies shutdown operations, SMME activity was not spared the brunt.
Seen by 22 on Sloane
According to a South African survey conducted by 22 on Sloane, over 55 000 SMMEs will not survive; and 42 350 employees employed by SMMEs are set to lose their jobs.
The world as we know it has changed and the way entrepreneurs operate will have to change. As the lockdown restrictions are relaxed and businesses begin to resume normal operations, SMMEs need to prioritise the rebuilding or adapting of their business models to the new normal.
Some businesses have been fortunate enough to have accessed relief packages whilst some have not been able to access these either through lack of adequate information, compliance challenges or the restrictive qualifying criteria in some instances.
In South Africa for instance, most funds targeted businesses that are South African owned meaning that foreign owned businesses have had to either look to other sources which at this point are certainly hard to come by or face imminent closure.
There is thus a call to action on the various stakeholders that support SMMEs to focus beyond the interim relief measures and look to facilitate sustainable recovery.
Impactful Recovery and Growth
With or without the relief funding, the small business owner will have to relook at how they can compete in this changing environment in order to survive. The need to impactful recovery and growth plans has become more relevant than ever.
Critical Components of an Impactful Plan should include: Vision. One’s vision for the business and two:
Core competencies and market opportunities. What you do well, what value do you offer relative to competitors, who wants it, what else can you do that you may have missed?
In execution of your programme, have a clear vision coupled with aligned competencies and opportunities is great and essential. However, without effective execution, all of that becomes just dreams.
Paths to Growth
Growth is crucial to the long-term survival of any business. It makes it easier to acquire assets, attract new talent and fund investments. Below are some growth path options that your business can consider.
Getting more customers
Staying in existing market, with existing product range, and finding more customers for those products. This path, you’ll probably focus intensely on marketing and advertising, as well as thinking about different pricing or promotional strategies to reach more people.
Getting more money from existing customers
Although finding new customers is a simple concept, it can be hard to do in practice. So, it’s also worth exploring how to make more money from existing customers.
Offering new products/services
Another way to grow is simply to offer more stuff.
Entering new markets
If you are currently operating only in your home country, the business can grow quickly by expanding internationally—assuming products are appropriate for shipping across borders. Or if products are already available internationally, you can make more effort to reach new markets by translating content into new languages and investing in true internationalization of website.
Opening new distribution channels
This one is about expanding the ways in which to reach people. If the business is currently a bricks-and-mortar company, opening an ecommerce website is a new sales channel. Or perhaps explore having products sold in retail stores, or on partners websites, or by affiliates.
Buying other businesses
If there are funds available, this option can be the rocket fuel for your growth strategy. When done right, an acquisition of another business can advance along some of the other paths to growth in a fraction of the time.
Nobody knows it all and nobody can compete like an island any longer. If cashflow is low, consider partnering with small, large, upcoming and even declining enterprises. Who offers complimentary services to yours? Which services can you let go off to focus on your core competencies?
Having products sold in retail stores, or on other company’s websites, or by affiliates include possibilities for you to partner around. Want to enhance your product with IoT? Now is the time.
Having evaluated the various paths, one then needs to decide which path or combination will be ideal for their circumstance and develop detailed plans.
If a business is worried about existing business model coming under threat from technological changes, then option could be a plan to develop new products. If, on the other hand, the business does one thing well and can see it continuing to do that for many years in the future, then perhaps staying focused on that one product and maximizing the number of customers it reaches is the best path.
Washington Mashanda is a management consultant based in Johannesburg South Africa.
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