Growth & Jobs |How MSMEs can survive difficult times

Micro, small, and medium enterprises (MSMEs) are being urged to protect their cash flow and develop a relationship with their financial institutions to help them through this period of recession.

The advice comes as many MSMEs continue to grapple with the fallout in their operations as a result of the recession brought on by the COVID-19 pandemic, with many either scaling back operations or going out of business entirely.

According to Colin Coley, senior business adviser, Jamaica Business Development Corporation (JBDC), one of the steps that MSMEs can take to survive this difficult period is managing their cash flow

“Cash flow is essential for any business to survive because funds flowing in and out are needed for the operation to be healthy. You’ll have expenses as long as your business exists, and it can be difficult to keep funds coming in. However, you can make your business healthier by implementing strategies to keep the cash flow moving, from increasing sales or billable services to trimming unnecessary expenses,” he advised.

Coley adds that businesses could also reduce their inventory costs. However, he advised that this should be done carefully.

“MSMEs can also see if anything can be done to reduce inventory costs without sacrificing the quality of goods sold or inconveniencing customers. Maybe you’re ordering too many of particular items, or something can be sourced somewhere else at a better price,” Coley pointed out.

The JBDC business adviser added that small-business owners often simplified the concept of diversification.

Core business

“Simply adding other products or services to your offerings isn’t diversification. At best, it’s a waste of time and money. Worse, it can damage your core business by taking your time and your money away from what you do best, damaging your brand and reputation,” said Coley.

However, he noted that being different is always a good option as an MSME.

“Offer something more or different than what the other guy does. Research your competition and see what you can do to entice their customers into becoming your customers. How are your competitors advertising? Visit their business locations. Ask consumers what they like or don’t like about those companies, then tweak your own business practices accordingly,” he stated.

Gillian Hyde, general manager, JN Small Business Loans, adds that it is also important to retain rather than lose customers during a recession.

“Entrepreneurs should try to hold on to existing customers. Unfortunately, some go all out to win new customers while neglecting existing ones, which they eventually lose. While new customers are important, your existing customers, if treated well, become ambassadors for your operations and will inform others about your products and services, and this will lead to new customers. Therefore, build a relationship with them. Any marketing you do must also focus on retaining your existing customers because they will play an important role in helping you to rebound,” she said.

The general manager added that having a relationship with a financial institution was also essential.

“Apart from saving and investing, entrepreneurs should secure funding before it is needed. Develop a relationship with your financial institution so that you may be able to access funds before difficulties arise,” Hyde advised.

“For example, they should establish a line of credit or get access to a business credit card where possible. If they are a micro entrepreneur, they may take advantage of affordable loan products that may become available. In addition, they should take advantage of payment holidays that may be offered.”

Coley emphasised that while there is always a temptation to market less, owing to the difficult economic climate, he advised that MSMEs should do the opposite.

“MSMEs should continue marketing because consumers are restless. They’re always looking to make changes in their buying decisions. Help them find your products and services and to choose them rather than others by getting your name out there. Don’t quit marketing. Step up your marketing efforts,” he stated.