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30 survival strategies for SMEs
Illustrations by Frantz Arno Salvador
Jun 21, 2012
Due to the current credit crunch, many small-scale and medium-scale enterprises (SMEs) are frantically struggling to cope with their mounting overheads.
But according to Ricardo A. Lim, associate dean of the W. Sycip Graduate School of Business of the Asian Institute of Management, there's a way for SMEs to avoid getting into this bind--improve their budget management and increase their productivity to make themselves sturdier and stronger during the storm and long after it blows over.
"By putting the right methods in place, a business can grab market share by taking advantage of opportunities and make itself better and more cost-efficient than its competitors," Lim says.
To give entrepreneurs specific survival strategies for dealing with the current economic slowdown, we then talked to top people of several tried-and-tested Filipino companies that had survived widespread economic crises in the recent past, particularly the Asian financial meltdown of the late 1990s.
Here are their major prescriptions:
1. Don't fear. An economic slowdown doesn't mean a recession. The textbook definition of a recession is two consecutive quarters of negative growth, and the Philippines hasn't reached that stage yet. As Eugene Lorenzana, president of Office Warehouse, says, "Slowdown does not mean the end. Let's not talk about recession because it might never even take place."
2. Plan for the worst. It may sound cynical, but Lorenzana suggests that businesses nevertheless must think of the worst-case scenario; there's no harm, he says, when you create back-up plans in place.
In the same vein, Bubu Andres, co-founder of Candy Corner, says that during the Asian financial crisis, her company faced the situation squarely. "We planned how to survive," she recalls. "We made a very tight annual budget, and we all worked harder to achieve our goals and manage our limited resources."
3. Keep innovating. Allan Ong, president of Cherry Foodarama, says companies need to invest more in innovation. But to maximize the return on their investment in innovation, SMEs need to effectively support their innovation efforts with a clear overall business strategy.
For her part, Teresita L. Ngan Tian, president of Lots'A Pizza, advises SMEs to continue to develop their flagship product or service and to innovate on the way they do their business.
4. Stay flexible. Many SMEs have an advantage over their larger competitors in that they can respond more rapidly to changes in the market or in the demand of their customers. Jay Camus, president of Czarina Jewelry, says he is getting more customers because his firm could offer more specialized products. "You can be more flexible if you're not bound by a set of numbers that you've got to hit," he explains.
5. Keep an eye on your competitors. Cherry Foodarama keenly watches its competitors to see how they are responding to the slowdown. Says Cherry Foodarama's Ong: "You have a choice: do the same or face losing your customers."
6. Continue to recruit new dealers and distributors. The wider your distribution network and the more dealers you have, the better. Antonio O. Santos of MICS Commodities Inc., a food processing business, says that the company's sales peak only during the last quarter of the year, but the stream of revenues from its nationwide distribution network compensates for the slow sales during the rest of the year.
7. Broaden your network of partners and customers. Santos says that his company tries to expand its market in two ways: first, by conducting free cooking demonstrations at the head office, and second, by conducting livelihood seminars in other locations on invitation by allied businesses and nongovernment organizations (NGOs).
8. Keep track of the numbers. Ong of Cherry Foodarama says the best way to deal with the economic downturn is to be aware of what your cost base is and to compare it to your revenue.
He explains: "When your revenues go up, your costs go up with it. When your revenues start to dip, your costs should also dip. The problem is that most entrepreneurs let sales go down for quite some time before they respond."
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