After two and a half years of business disruption thanks to Covid, New Zealand’s SMEs are now facing the twin-impact challenge of surging living costs and inflation spirals (Stats NZ reported a 6.9% annual jump in the consumer price index for the year to the March quarter). So, what can SMEs do to counter these new threats?
We know New Zealand’s SMEs are used to being resourceful in a crisis if, sometimes, the strategy they incorporate looks a little different. Go big, bold and brave, make drastic savings or small incremental efficiencies? Panic mode? Sure and steady?
The knee-jerk reaction in the drastic savings camp is to raise prices, end third-party contracts, scale back growth plans and even adopt subscription-based payment models. Whatever the approach, SMEs are scrapping for every dollar and the idea to never waste a good crisis rings true now more than ever.
For example, StartUps.co.uk urges SMEs to think tactically about price changes, saying: ‘A good alternative to raising prices is to apply optional fees to specialist service offerings – or those activities that put the most strain on your supply chain.
‘Similarly, you might want to think about implementing product swaps. Materials and packaging can all add up. Cheaper equivalents can be sold at a lower cost without compromising margins.’
Now for some good news. The relaxation of international borders is seeing more than 30,000 people arriving into New Zealand each week, providing a much-needed shot in the arm for the tourism and hospitality sectors. While these figures need to rise significantly to make up for two years of nothing, the country is still a great place to work – ranking first once again among 190 economies for ease of doing business (World Bank, 2021). Three good ways to use a crisis:
Rebuild your supply chain
‘Relying on a single, lowest-cost source is not a sustainable approach, and it is more than likely to backfire on you later down the road,’ suggests The Sun Daily.
‘When it comes to your supply chains, ask yourself these questions: Are you single sourcing from only one supplier? Or are you heavily reliant on only one customer? If any one of them pull out, can your business still stay afloat?
‘SME owners should carefully review and manage interdependent levers in the organisation such as multiple sourcing, localising, and tapping into diverse markets. Your supply chain model should be adjusted to allow for more flexibility and decentralisation with a robust risk management system in place.’
Upskilling and training employees
When dollars are tight, upskilling and retraining your team can seem like a huge outlay – or an irrelevant one. However, PwC found that upskilling results in an ROI of at least 100%. For every dollar spent on upskilling, a saving of $2 is generated.
For SMEs the impact on an employee leaving is huge. It's tough to build a business with high employee turnover, especially when departments of just one or two personnel are common. It also costs money to advertise and find new staff – a minimum of 50-60% of an employee’s annual salary just to replace them.
The cost of losing one employee can range from tens of thousands of dollars, according to Deloitte. So the message is clear: ‘[Make sure] everyone has access to those opportunities. You might be surprised who takes advantage and benefits the most from your offerings.’ (Forbes)
Research has shown that a settled team sets up a chain of employee retention which in turn produces higher customer engagement and brand loyalty.
Focus on the small stuff for big change
SMEs have the flexibility over larger organisations to make small tweaks for greater outcomes. So also think about shouting about your services and products, and being brave. Consistent communication is key in times of crisis – and it's also the time to be as loud as possible. Elsewhere, could fully embracing flexible and remote working, for example, improve employee wellness and boost staff retention and loyalty? Are there opportunities to use automation and digital transformation to eradicate repetitive tasks and monotonous processes
Are you ready to turn your crises to your advantage?
For information on how The Icehouse programmes, workshops and coaching and advisory services can help your business, click here.
For more business ownership and leadership advice, check out more of our resources.
Icehouse Alumni? For exclusive content on Icehouse Central, register now.