Small and medium enterprises (SMEs) are key engines of the world’s and the region’s economies, accounting for about 90 percent of businesses globally and 94 percent in the UAE. However, they can also be the weaker link: indeed, SMEs often operate leanly, with tight profit margins and just enough people on staff, which can work when markets are dynamic but leaves them particularly vulnerable to headwinds.
This is when smart management and healthy operating practices can make the difference and reduce the risk of bankruptcy. Even the choice of a printer can help; with HP’s Neverstop laser printer, for example, entrepreneurs can save on costs, time and productivity. Here are actionable insights for SMEs to navigate efficiently all kinds of business climates.
Financing: Never ever run out of money
- Clearly identify and understand your funding sources: Who are your current investors and how would you assess your relationship with them? Who are the new investors to consider at your current stage of development? Which banking options are available to you and best adapted to your business?
- Build a network. Do not consider banks and investors as simple sources of funding that you can pump for cash before you move on. Rather, continuously build a relationship with them and keep the conversation going. It will allow you to access money quickly, when you don’t need it urgently and, most importantly, when you do.
- Understand your cash position and create scenarios for specific situations – business boom, business as usual, down market and worst-case situations. Continuously update your cash requirements to ensure you remain agile, regardless of the market state.
- Focus on your working capital and avoid clients that already delay payments on good days – they will most probably default on bad days.
- Make sense of your business’s health and long-term viability. Truly understand your unit economics by having a clear grasp of where your revenue comes from, starting with the fundamental minimum piece of your business that you can measure. Strong unit economics create value with each new customer and increase your business’ chance of success. Weak unit economics destroy value with each new customer and accelerate failure.
- Aim at running a profitable business, instead of just breaking even. Showing growth is good but profitability is a strong indicator of a higher chance of survival in a down market.
Business operations: Substitute variable costs to fixed costs
- Avoid capex even though they might seem to save cost in the long run. This type of expenditure will put a strain on your business in a down market. For example, lease a car vs buy a car; rent a flexible office vs a fixed office; buy a smart printer, like HP’s new Neverstop Laser Printer vs a fancy one. HP Neverstop Laser Printer’s groundbreaking technology reduces toner cost by 80 percent and prints 5,000 pages out of the box with no interruptions.
- Have a base salary with a variable upside. By offering a financial incentive linked to your growth and performance, you will attract employees with a more entrepreneurial mindset and will be able to align them with the objectives of your company.
- Avoid non-essential expenditures and maximize your cost efficiencies. Focus on the must-haves and forget about the nice-to-haves, opting to invest into hardware and software that will allow you to operate more efficiently. HP offers a wide range of products – from laptops to storage and printers – and solutions specifically designed to help SMEs overcome their IT challenges.
- Automate your operations so you can be lean and scale up and down without depending too much on people.
- You can also: Reduce supplier lead-time, optimize order size and purchasing frequency, centralize inventory control, eliminate obsolete inventory, and conduct a continuous inventory reduction analysis.
Maximizer mindset: Unlock the most value in every activity you conduct
- Leverage grants, governmental programs and mentorship programs. They are free resources that can help you unlock money, network and, most importantly, knowledge – making less mistakes means you lose less money and grow faster.
- Treat every customer as best you can. Happy customers are more likely to come back in good times and bad times. They also generate great word-of-mouth free marketing value.
- Prioritize your tasks. With limited resources, you need to focus on the activities that create the most value to your business.
- Look at the bigger picture. Adopt a solution-based mindset instead of an item-based one; it will help you avoid focusing on one problem and overlooking the wider implications. For example, look at your IT as a full system, and not product by product. HP provides complete solutions that ensure all your tools work seamlessly together, optimizing time, cash and efficiency.
- Find a co-founder and build a strong leadership team. Growing a business is challenging. A strong team will overcome challenges much better and faster than a lonely entrepreneur.
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