Thousands of Kenyans can attest to the fact that 2019 was one of the toughest economic years that the country has experienced so far. The year was characterized by a wave of mass layoffs that hit local firms which account for 90 per cent of all businesses in the country.
According to the Registrar of Companies, over 388 private companies in Kenya were dissolved last year alone. The companies varied across all sectors including single proprietor businesses, family-owned firms, SME’s and local subsidiaries of international companies.
Among the companies that made it to the headlines in regards to layoffs include; the East Africa Portland cement, which announced that it would lay off its staff citing a reorganization plan that required all its staff to reapply for their jobs, Stanbic Bank Kenya which laid off 88 staff in an early retirement scheme and the Aviation company, Air Afrik, which retrenched 200 workers from Kenya and Sudan following massive losses amounting to Sh2.1 billion.
By end of 2019, the unemployment rate in Kenya was at 9.30 per cent according to Trading Economics.
Whereas little can be done to undo what has already happened, all hope is not lost as 2020 seems to have started on a good note. The country’s economy is expected to grow at 6 per cent this year and will be propelled by favorable weather conditions and big-ticket investments around the Big 4 agenda on health, housing, manufacturing and agriculture according to the African Development Bank (AfDB) Groups, African Economic Outlook 2020, titled: Developing Africa’s Workforce for the Future states.
Additionally from the report, the vibrant and youthful composition of Kenya’s population will also play a crucial role in providing the required labour to achieve this.
The question however remains, how will SME’s, which account for 500,000 annual job creation, thrive in 2020? Below are some strategies that SME’s can incorporate to ensure their long term survival;
Protect cash flow.
Money is the lifeline for any SME, regardless of nature, size or the industry within which they are operating. Yet, SME’s often get trapped in the trivial matters such as hiring an expensive office space, equipment and other facilities.
It is imperative to reduce on these costs for instance by opting for a co-working space rather than paying expensive office rent. If you can reduce expenses and look at your overheads, don’t get caught in the trap of a few consecutive months of overspending which could become the norm.
Speed up cash inflow
It is advisable for SME’s to look into ways of improving cash inflow such as preferential payment terms or having a pre-payment plan where a proportion of the value of good or service is paid upfront. Invoice discounting, at a reasonable cost, is another alternative.
This will ensure that the overhead costs are taken care of whilst at the same time protecting your business against late payments.
Make the Most of Current Customers and Clients
A bird in the hand is worth two in the bush. The bird in this case is your current customer and he or she is likely to recommend your business to other potential clients if your service delivery is top notch. Better yet, repeat business is better than no business.
In a nutshell, keep your customer happy if not delighted!
Invest in a Marketing Budget
In lean times, SME’s make the mistake of cutting their marketing budget to the bone or even eliminate it completely. But lean times are exactly the times your small business needs marketing the most.
Helping your customers’ find your products and services can only be done via aggressive marketing.
Further, part of the marketing budget can used to research your competitor’s clients and approach them with a better offer.
Marketing is food, not medicine. So do not give up on marketing
Leverage on the loan facility set to be launched by the Treasury
Access to funds still remain one of the biggest challenges that SME’s face in the country. However, with the government setting up a loan facility for them, it will provide access to more capital and hopefully address this challenge when starting a business. The fund is meant to address capital deficit and credit access to small businesses which have suffered in the last four years when the cap on interest rates was put in place.
Engage the services of a trusted business advisor and accountant
Rarely do most SME’s invest in accounting and financial infrastructure or support in the start-up phase of their business as this is not considered to be an urgent matter.
However, this could not be further from the truth.
An accountant or advisor will engage them regularly and mentor you with the aim of building your financial acumen. Further, their support will ensure that critical processes and systems for financial accountability are set up from the get go.
For more information regarding this alert, please contact;
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