With record-high petrol price hikes expected for April, along with sharp rises in prices across the country’s consumer price inflation (CPI), Retail Capital MD Miguel da Silva has implored SMEs to act now to weather the storm.
The petrol hikes will not only be affecting motorists, but every sector of the economy is going to be forced to pass this increasing input cost on to their customers, according to Da Silva.
“This can have a catastrophic effect on households and on small and medium enterprises (SMEs), because many are already operating with squeezed margins.”
Da Silva said SMEs are the lifeblood of this country. Besides employing people, they also provide products and services for communities all over the country. He said SMEs should buckle down for the oncoming storm.
“The first is cutting out all unnecessary expenses, tightening the belt, so to speak. Defer any investments and payments that are not necessary for the business in the short term. Then, meet creditors and landlords and pro-actively negotiate more palatable terms.
"Think about it, it is not in a landlord’s favour to have a small business fold in an environment where small businesses are struggling. Try and renegotiate payment terms over the longer term.”
Da Silva said that even although it appears risky, SMEs must be brave enough to test price increases on their customers.
“You can only squeeze your margins so far. I know we are surrounded by price increases, and we don’t want to contribute to the general negative environment, but staying in business should be the primary focus,” he said.
SMEs should also take the time to invest in the customers they already have, advised Da Silva. “Spend time on your current customers. Delight them and give them impeccable customer service. Work out ways that you can entice them to help your cash flow, such as offering bulk deals or discounts for upfront payments.”
Another way to keep calm for SMEs is to keep a sense of perspective. “Don’t become obsessed with news cycles. Appreciate the gravity of the situation, but understand that an opportunity mindset in the tough times will stand you in good stead for when the environment turns, as it surely will.”
BUSINESS REPORT ONLINE