Auto

‘ABC’ Strategies for Sustaining Small Business Growth in Least Developed Countries (LDCs)

As the World Economic Forum kicks off in Cape Town, South Africa, this article suggests simple ways that small businesses in the world’s poor countries can keep their businesses afloat.

I. Maintenance of adequate financial records.

The numbers a business generates are an index of its health and growth. However, many small business managers tend to be afraid of them and therefore do not monitor and update them regularly.

It is not enough to monitor the health of the business using the annual accounts. This is usually not available until the following year, which in terms of knowing a company’s financial position is quite a long time.

There are good reasons why the Owner should ensure that good business records are kept, providing information to, for example, the Inland Revenue, Customs and Excise (for VAT) and the Bank Manager. The most important reason above all, however, is that properly kept accounts, summarized at the end of each month and combined with an inventory or stock value estimate, will provide the Owner-Manager with up-to-date information. information about the business. By doing so, this would allow the Owner-Manager to spot signs of danger and react while there is still ample time to take corrective action and plan for the future.

II. The development of modern financial management practices.

This is necessary to assess the working capital requirements of the business. Discounted cash flow analysis could be used to support investment decisions (ie import and export of goods). Financial management practices such as discounted cash flow analysis could be added to the Ghanaian primary school curriculum in the early school years, as most small businesses or small and medium-sized enterprises (SMEs) employ many people drop out of school. In the event that most products are imported from foreign suppliers, proper currency management is very important. As mentioned above, foreign currency hedging could be used to reduce or lower the cost of purchasing imported products. This is not to say that the small business should grow overnight, but rather to allow small businesses to identify with modern financial management practices in their early stages of development if they are to sustain their growth.

third Appropriate financial management strategy

This is the way to use the available funds to achieve the desired goals. In other words, the establishment of goals so that the different financial obligations are fulfilled with the best available financial practices that involve the management of working capital and current assets. This would involve keeping good records of assets owned by people that are used by the business. Periodic estimates of the market value of these assets would be more appropriate. This is to know the real value of the business at any time.

The introduction of a proper financial and investment strategy would provide steady and sustainable growth for the company in the future. Reliance on overdrafts as a form of working capital could be alleviated if the Owner-Manager makes arrangements with their Bankers to have a term loan agreement. Other sources of funding should be explored, such as having a business relationship with more than one bank and attracting business angels. You must have a strategy.

The company should seek to take advantage of some of the existing government schemes, such as the Business Assistance Fund (BAF) and request a financial management consultant to help them in the formulation and implementation of the strategic financial management plan. In line with the above, it is imperative that professional Managers get involved in the management of the organization. This gives the company the opportunity to achieve its goal of entering the broader economy and the ability to maintain its profits.

IV. Negotiations and dealings with bankers

There should be negotiations with the bankers, not only to discuss loan rates and maturities, but also to protect the personal wealth of the Owner-Manager. -that is, convincing the bank to accept new terms so that it no longer acts personally as guarantor of the business. Likewise, the Owner may agree to pay a percentage point or higher interest in order to enable the separation of those assets that belong to him and the company. V. Establish an appropriate Management Information System (MIS)

The use and introduction of information technology within the company to facilitate the collection of accurate data or information, and the maintenance of business records, could act as a powerful competitive weapon. i.e. the introduction of computer hardware and relevant financial management software, EPOS (electronic point of sale) machines, accounting software, etc. This should be based on financial planning and forecasting.

SAW. Development of a financial management benchmark for SMEs

However, the company’s growth is somewhat hampered by structural weaknesses inherent in the particular industry. These include, for example, fragmentation, limited distribution channels, lack of concerted effort and coordination, and most importantly, lack of a standard financial policy. By standard financial policy, we mean a benchmark for a financial management discipline to be embedded in some way in small business owner-managers. For example, a strict code preventing excessive trading, overstocking and understocking should be outlined and enforced.

VII. Introduce more differentiated products and be profitable

Since the market is young and still growing, a policy of increasing market share should be continually followed so that stock turns increase and slow-moving items are reduced. Market share in export markets could be gained through a more proactive and targeted marketing orientation. This system would be much more efficient than the current approach of random selection of clients.

Being a small company, you have an advantage as you can become more flexible to meet the demand of your customers. Areas where this could be exploited include, for example, lead times, quality, order processing and new product launches, and customer service. It can also support the business by reinforcing quality and keeping it at a high level. If people discover the quality of the product, the company will be able to generate more sales through product awareness, training, and development programs.

A very rare tactic in Ghanaian business circles, the company could maintain and increase market share by providing its distribution channels with efficient after-sales service. This can be achieved by improving customer service to differentiate products through fast delivery, order taking and processing, quick response to inquiries, product availability.

VII. The creation of a new organizational structure.

Some financial institutions consider the caliber of staff they are dealing with to negotiate an agreement on a transaction. The employment of skilled workers outside the family, or a motivated workforce. For example, a finance manager, an account clerk, a financial manager who could function as a secretary. The limited financial resources of small businesses often make it difficult for them to attract high-quality people in the early years. However, as the company grows, its administrative requirements will often increase beyond the capabilities of the original staff. The additional workload is normally transferred to the Owner, who simply cannot handle all the tasks at hand. If the survival and growth of a business depends on sound judgement, then having the best possible decision makers with the right financial background is vital.

IX. Development of a new management style that fits the vision of the company.

In small businesses, it is often the Owner who has a vision for the business and takes care of every detail. Unfortunately, this 100% hands-on management style often doesn’t allow staff to develop their talents and skills. Staff are not encouraged to think that the boss does not have all the answers. Without realizing it, an Owner usurps the responsibilities of an employee. There is a danger that staff may not be able to use their initiative when the owner is away. For this, it is proposed that the Head develop an organizational style of leadership. This would allow employees to reach their potential and your expectations of them. This can be achieved through training so that they can carry out their roles and responsibilities effectively.

X. Development of a financial plan to address the following:

Sales and Distribution This mechanism is used to deliver products and services to customers, that is, the company’s own sales force must be used for direct marketing. Alternatively, they could use other distributors and retailers or set up their own outlets. This is intended to boost distribution, which turned out to be a problem for most SMEs.

Pricing and discount strategy: Current practice within the business is for the owner and staff to charge different prices to different customers based on their judgment of the customer’s ability to pay. This creates some confusion among some customers. While an actual price list is not critical, the general pricing structure and rationale behind this structure should be provided. Politics related to discounts and price changes should be addressed, as well as the impact of a pricing strategy as a whole on gross profit (revenue less cost of goods sold). The Homestretch Venture, for example, has proposed to indirectly recover the cost of hairdressing services by providing free drinks to customers on busy days, including Sundays, when competition is greatest in the hairdressing business.

Future Marketing Activities and Related Budget This is intended to show how the overall marketing effort will be organized and how resources within the business will be allocated among the various marketing tools. Sales strategies must be formulated in each market to perpetuate future growth. E.g. the installation of agencies in other parts of the country and the expansion of links with suppliers, etc. This strategy would be a copy of the large Ghanaian retail and manufacturing companies that have been successful using such a strategy. Advertising, public relations and promotions: This will play a significant role in the company’s attempts to generate sales. The company’s intentions in this regard should be conveyed in concise basic terms. One way to achieve this is to focus on the concept and creative content of the communication campaign. For example, the equipment to be used and the vehicles to be used, such as electronic media, print media, or direct mail.

The services of an outside agency should be explored to help with promotion and advertising. Although FM stations are popular, other means should be found to build the corporate image of the SME. Contacts should also be established with the local media that write or broadcast information about businesses within the Community, ie newspapers, radio and television. This is believed to reduce costs but generate the required sales and returns, thus providing the necessary cash flow.

Leave a Reply

Your email address will not be published. Required fields are marked *

Relaxed Luxury Vintage

September 28, 2022