A crash course on surviving a bad economy

Jacqueline Mahugu The economy is in turmoil. There are job layoffs all around, even in giant companies.  Most recently, Telkom Kenya, EABL and Stanbic Bank have caught the wave, with Portland Cement announcing layoffs of their entire workforce. How can small businesses survive a financial crunch? And how can an employee find a lifeline?
 CASH FLOW IS KING FOR SMALL BUSINESSES Ken Gichinga, Chief Economist at Mentoria Economics. My business has been affected, but I am staying afloat by… 1. Keeping our costs low
SEE ALSO :Public rants ought not to stall economy
We have to be very prudent with how we manage our costs so the money that we get, we try and make sure that we have a buffer for a couple of months. 2. Cautious expansion We are very cautious when launching new programmes and initiatives. 3. Using cheaper marketing methods We are an economics-based, so we have embraced innovation and have been using digital platforms to put our content (research and analysis) out there. We realised we can share our messages using social media like WhatsApp. We used to do 100 per cent newspaper advertising, but now we do 50-50 and have really embraced digital platforms to spread our message, which have cut a lot of our costs. SEE ALSO :Banking boosts Kenya’s economy
If you want to go into business… You have to research on the industry. For instance, if you want to start selling used cars, you have to check if the industry can make money, ideal locations, what new thing can you bring to the industry to give you an advantage? Invest at least one hour a day on research, looking for clients, so that by the time you are ready, you already know who your clients are. Read books. Understand the general economy. Understand the big picture of the country. Business people should focus on cash flow… Right now the money supply is very tight in the market. When you get paid by a supplier or when you get paid by a client, try and really see if you can be innovative with the costs, so that the little cash that you have can push you further than usual, say three months instead of one month. SEE ALSO :Increase funding to critical sectors to stimulate growth of the economy
This is because one of the challenges right now is that there are so many late payments coming in. As a small business, your liquidity strategy has to be very good, such that you can always see how the next three months. When times are good and there is a lot of business it is not a big deal, but when times are tough, try and be innovative with the costs, so that that cash can try and push you at least for a couple of months. How to keep customers buying in a bad economy? One of the biggest mistakes businesses make is that when things are tough, they cut back on their marketing costs. That is a bad thing, because if there is a time that you need the market to know you, it is that time when things are tough, because it means that your current client base can’t give you enough business. So you need to cast your net even wider. How to keep employees motivated when you can’t increase salaries… SEE ALSO :How most of Sh3tr budget will line pockets of the rich
The most important thing is to appreciate them. When business is low and there isn’t enough money you might not be able to raise their salaries, but you can give them non-cash benefits. These are incentives. For instance, you can give them days off or increase the number of their leave days, reduce some working hours so that they have a long weekend – be innovative and come up with some benefits. Time is a great asset too. They will feel appreciated. Be honest with them and tell them that the economy right now is not doing very well, which they have also witnessed with the retrenchments going on. Encourage them to continue delivering quality. The economy always has booms and bursts. CHECK YOUR COSTS Joanne Mwangi, CEO Professional Marketing Services Group, Chair of Federation of Women Entrepreneur Associations (FEWA). My business has been affected… Clients have stopped spending money on communication across the board. Others are simply unable to pay, so our cash flow is affected. We are using our reserves and savings. Government is the biggest spender and when government is not spending, all of us feel it. Main challenges? Convincing customers that it is when things are tough that you actually need to keep communicating, because right now if you communicate your communication is very visible because you are not competing with other people. Your target market is not being so bombarded by so many other messages, so they focus on your message. Anyone who wants to do a product launch or rebrand, this would be the best time to do it. When the market turns around, you will be ahead of everybody else.  If running a business, keep your top line stable… Look at the means of revenue that you are currently generating. Ask how you can either improve it or at least stay constant. If you can’t keep your top line stable… You need to be aware that your numbers are dropping very quickly because you could be spending the usual way but not looking at how much less you have available to you. It is just like a personal budget. Look at where you are fully in control expenditure-wise. Look at where you are spending too much money such as your overheads, how much rent you are paying, how much you are spending on things like internet, the equipment your team is using – you can offload some unnecessary items to give you some liquidity straight away. Re-use and recycle your paper. When you are looking at your profit and loss statements, do it in per centages, so that you see, for instance, what percentage of revenue you are spending on rent. Once you know what you are spending percentage-wise, if you focus on the top four biggest spends and work hard to reduce them you will see a definite impact. OUR SAVINGS FROM THE GOOD TIMES ARE TIDING US OVER 

Mugo Mutembei, CEO of Bristem Developers.

My business has been affected… Right now jobs are completely down in the construction industry as people are not undertaking projects. If there are no jobs it means there is no money. That means some of our team members are not working because there are no jobs for them. We take them on board when we have work, so it means they are essentially jobless. We have been staying afloat because… We do an annual budget which caters for annual operations. When we do not have a lot of projects we work with the savings we have from the profits we have been making before.  GIVE CREDIT AT OWN RISK Habil Olaka, CEO, Kenya Bankers Association. Curb leakages…  Maintain a tight lid on the expenditure. Reduce waste and incur only what must be incurred for purposes of generating revenue. Right now you do not have much laxity for discretionary expenditure. Cost-cutting comes in. That is why companies go to the extent of cutting their expenditure to the bone. Cutting the flesh to the bone. Even with things like tea, instead of having it at 10am and 4pm, you have it once. This is extreme but illustrates the point. They become conscious of putting off lights. Just curbing small wastages. Reduce your investments in fixed assets There is also control in terms of expansion, so reduce investments in fixed assets. Normally you invest in fixed assets to expand capacity. It could be a dairy where you had equipment for milking three cows at a time, and you are thinking about expanding it to six or two nine to expand your production capacity. Lean times are not the time to expand capacity, as demand is down. You would rather maximise on existing capacity, until conditions improve. Maximise revenue  Look at all possible loopholes where there could be revenue leakage and seal them, so that you ensure you are collecting all the revenue you are generating. Minimise on giving credit…  This is a time when most people are likely to default on payments. Operate on near-cash or cash basis. Near cash means you collect the cash the same day upon delivery or give very short credit, meaning you collect the money within the same week. Maintain your most loyal customers… When things are tough, they will still support you. Give them the best service possible and maintain trust. Don’t start overcharging them just because times are hard.