How can I save my business?
If you’re not asking yourself this question, you don’t live in South Africa! Even the JSE’s own share value took a dive this week because of a significant fall in turnover. So, what to do?
Yes, we are all in it together. This is probably not your fault, but you can’t just blame the economy. It is your responsibility to ensure that your business survives despite the economy.
Look around you. What did Standard Bank do in May and June 2019? They closed over 100 branches! Why? To cut costs, that’s why.
So, step number 1. Re-calculate expected turnover going forward, based realistically on current trends.
Step 2. Cut your costs to below that expected turnover. This is surely the most difficult part, so here are a few thoughts –
1) Rather than reducing your staff compliment, consider putting all of your staff on short time and reducing their salaries accordingly. Part of a job is better than no job, so if you approach the matter carefully and sympathetically, you stand a good chance of getting the buy-in from your staff.
2) If, like me, you have structured your affairs to take advantage of all tax breaks, you may be able to cut costs here. For example, you may have been debiting director’s salaries by more than you draw and crediting your loan account, then paying the PAYE on the greater amount simply because you’re still in a lower tax bracket than the company. Change that and you can save a significant amount of PAYE. The point here is that there’s not much point in structures to save tax if you’re not showing a profit.
3) Re-think your marketing, but be careful. You don’t want to kill the goose that lays the golden egg, even if the egg ain’t what it used to be. Just be sure that you are getting maximum bang for your buck.
4) When things were going fine, you allowed certain costs to creep in because you were more focussed on maintaining the quality of your customer service than on cost saving. Now is the time to revisit all of your costs (start with the debit orders) and see where you can trim or even eliminate. Ask yourself. “Do we really need that?”
5) Look as carefully at your personal expenditure. Ask yourself. “Do I really need that?”. If you can save here, you can reduce your drawings. After all, you’re expecting your staff to take a hit, so take a hit yourself.
Step 3. Now focus on increasing your turnover. Again, some thoughts –
1) Ask yourself “Am I doing anything differently now compared to when things were going well?”. If the answer is “Yes”, then maybe it’s not the economy that is hitting your business, perhaps you shouldn’t have made that change. We changed our marketing consultant last year, just when the economy took a dive. The new one did what appeared to be a great job, but the turnover didn’t show that, so maybe that wasn’t just the economy.
2) Ask yourself “Have there been any changes in the marketplace that I have not responded to?”. Have buying patterns changed? (Standard Bank recognised that branches are much less relevant now that most banking is done on smart phones). What is the competition up to? (Every mother’s son is now selling shelf companies at ridiculously low prices from their home office).
3) Ask yourself “Is there anything that I can do differently to improve turnover?”. Get creative. Think out of the box. What other skills do I have? Are there any additional products or services that I can sell along with my mainstream items?
Step 4. Don’t give up!