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Small business owners can survive the credit crunch by being smart
April 16, 2009
By Nikki Viljoen
The credit crunch is taking its toll on all companies - big and small. Small businesses stand a good chance of surviving the crunch because of their flexibility and ability to adapt to difficult situations.
However, entrepreneurs will have to improve their operational efficiencies if their businesses are to weather the financial storm. Here are some handy hints.
Borrowing
If you can possibly avoid it, do so. Money is relatively easy to borrow, but paying back is another story. That said, if you need to borrow money, make sure you have done your homework properly.
Be sure to cost in all the factors, such as repayments and interest fluctuations. If you only "just" qualify, it is probably not a good idea to do it.
There are several other options available, such as the Small Enterprise Development Agency, the Department of Trade and Industry, Business Partners, Khula and so on. All of them will require proper business plans and forecasts.
Managing the finances
Keep tight control of your company's finances. Not knowing what's in the bank, what's coming in or going out spells trouble. Before spending, ask yourself if the expenditure is absolutely necessary.
Compare prices; if you have been using the same supplier for years, it is time to check out other suppliers to see how much they charge.
Make being a VAT vendor work for you - claim everything that you legally can. That means buying the newspaper from a shop rather than a street vendor. That way, you can claim the VAT back.
Make sure that your suppliers are VAT vendors. Using suppliers that are not VAT vendors means you are throwing money away.
Make sure you understand all the tax breaks that there are for small businesses. There is much that small businesses can claim for, but many owners don't because of ignorance. If in doubt, speak to an officer at the SA Revenue Service.
Sales and marketing
Go back to clients you have not sold anything to for years - chances are they may need your product or service again. Nurture the business relationships you currently have (that does not mean you have to allow clients to abuse you).
Get rid of clients that take up 80 percent of your time and effort for 20 percent of your income. This will give you time to deal with customers that appreciate your efforts and contribute more to your bottom line. Do not be afraid to network or cold call.
Administration
Make sure policies and procedures are in place to maintain structures in your business. This is a good time to get rid of employees who do not contribute to the wellbeing of your company.
Plan your days, weeks and months to streamline the work flow. Plug up all the holes that bleed your money.
Work hard, but more importantly, work smart.
Above all be honest in your dealings; it shows integrity and builds credibility.
Nikki Viljoen is an internal auditor and business administration specialist. She can be contacted on 083 702 8849 or nikki@viljoenconsulting.co.za or www.businessreality.blogspot.com
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