Reading Time: 4 minutes
With winter just around the corner, many businesses will be going into the low season. This means fewer customers, therefore, less revenue. The trick to not just surviving this period, but making it work to your advantage, is to have a plan for managing your cash flow as well as using the time to prepare for future success.
With this in mind, we’ve put together four tips for businesses to manage through their quiet months:
- Stick to a plan
- Take advantage of the downtime
- Plan for the busy season ahead
- Learn and learn again
1. Stick to a plan
Low seasons come around every year and should not take you by surprise. Every successful business should have a plan in place, much like they’d have a plan for the busy season. To start, don’t base your slowest season’s plans on your busiest season’s results. It won’t take long for this type of planning to cause serious problems for your business finances.
Your plan should anticipate seasonal fluctuations and adjust accordingly. If revenue is lower, you will need to cut costs. Potential areas for seasonal cost savings include:
- Fewer operating hours
- Reduced workforce
- Fewer or smaller inventory buys
In addition to cutting costs, consider where you can leverage existing assets to generate income. You could leverage assets by:
- Selling off excess or aging inventory at a discount
- Securing a line of credit against inventory, equipment, and property
- Renting unused equipment to other businesses
Related: Winter is coming: How to prepare your restaurant for the seasonal slump
2. Take advantage of the downtime
The slow season is the one period of the year when you have time to focus on areas you may ordinarily not have time for. As you get close to the slow season, prepare yourself to take advantage of the time it provides.
Plan to Plan
The slow season is a great time to develop roadmaps for your business. Now is the time to determine what aspects of your business need attention. Think about how you can best prepare your business for the uptick in customers, transactions, complaints, and everything else that comes with the busy season. Be prepared to plan for these busy season realities as the slow season arrives.
Here are some common areas that often go overlooked as you grow your business:
- Employee benefit packages
- Updated business plans
- Marketing strategies
- Organizational roadmaps
Areas that deserve your attention vary depending on your business’ industry, maturity, growth, and other unique factors. The best way to prepare for your slow-season planning is to identify areas that deserve your attention.
Take control of administrative tasks
Before the slow season begins, identify administrative tasks that need your attention.
Your administrative tasks will vary depending on the nature and stage of your business. But, there are some common administrative tasks that many business owners avoid during the busy season because they are either too time consuming or boring:
- Tax strategy
- Staff growth and outsourcing needs
- Internal policies and procedures development
Whether you have neglected these tasks in the past, or you simply need a good chunk of time to get these tasks completed, be ready to knock them out when the slow season provides time.
3. Plan for the busy season ahead
Once the busy season arrives, it’s too late to prepare for it. The slow season is a perfect time to ensure that you make the preparations and adjustments needed to hit the ground running when the busy season comes back around.
All employees benefit from training, but finding time to train isn’t easy. During the slow season, you have the time to offer training options that meet your employees’ needs. Newer employees may need some basic onboarding training. Your more seasoned employees likely need more advanced training to improve their skills. Identify the training needed across your workforce, and plan that training before the slow season hits.
The slow season is a good time to dive into your inventory strategy, if it’s relevant to your business. The goal of an effective inventory strategy is to identify the most effective and profitable inventory method for your business. While the slow season is the time to conduct an inventory analysis, you must develop a plan beforehand that will serve as your roadmap to execute this.
Here are some common metrics and processes to consider when reviewing your inventory practices:
- Inventory turns
- Average shipping time
- Cost of inventory
- Volume discounts
- Fill rate
- Shipping accuracy
The list above is a starting point for analyzing your inventory practices. Before the slow season arrives, determine which metrics make sense to review when the slow season gives you a window of time to do so.
During the busy season, track the metrics applicable to your inventory strategy to ensure you are ready to execute your review when the low season arrives. An effective inventory strategy will be unique to your business.
Related: Practical cost-saving tips for your business
4. Learn & learn again
Perhaps the best rule of thumb when preparing for the low season is to remember what you did to prepare for the last low season.
- Did you stick to the plan?
- Did you take advantage of the slow season?
- Did you utilize the slow season to prepare for the busy season?
In answering these questions, you can repeat successful behaviors and identify your opportunities to improve.
Reading Time: 3 minutes
27 March 2021 marked one year since the introduction of the five-tiered Alert Level system and South Africa’s move to Alert Level 5. Like many people, we’re reflecting on the year that’s been.
One year later and many businesses are still feeling the effects of having to adapt and survive during a global pandemic. We’ve seen many businesses close their doors, some shift their focus and new businesses arise. All of this indicates that South African entrepreneurs are committed to strengthening the economy with the help of government subsidies and other alternative business funding resources.
In more recent months we have seen an undeniable surge in business activity due to the easing of lockdown restrictions. There has also been overwhelming support shown between businesses as well. “There is a rich abundance of knowledge, skills, and expertise in our SME sector – all of which has played an essential role in SMEs survival and ability to adapt during the pandemic. Part of this is that we have had to move away from a ‘business as usual’ approach and realise the need to learn from the lessons that the past year has taught us in order to plan and prepare for the future,” says Trevor Gosling, CEO, and co-founder of Lulalend.
Download our eCommerce Guide for more information on how to take your business online.
Related: 5 Digital Marketing Strategy Tips: COVID-19 SME Support
The most obvious and widespread impact of the pandemic and resulting lockdown on SMEs was on revenue.
The commencement of Level 5 lockdown impacted SMEs income streams, leading to cost-cutting and even layoffs. Some of the most affected industries include tourism, hospitality, non-essential retail. At the height of lockdown, a large percentage of Lulalend’s customer base told us that they only had 1 month of cash runway to make it through.
Source: McKinsey & Co “How SA SMEs can survive COVID-19” July 2020.
In an effort to adapt and diversify, many businesses turned their heads towards a more digital approach during the early days of lockdown. This encouraged online sales and boosted vulnerable retail sectors that would ordinarily function on a bricks-and-mortar basis. And here we saw the rise in new – and quirky – new business too. The rise of eCommerce brought about a new digital age like never before. “People have now gotten used to living in a digital world,” says Gosling.
Businesses that were able to take advantage of digital optimisation are those that had access to a line of credit in a time of need. Positive cash flow is essential for the survival of your business – especially during uncertain times. When you run into cash flow challenges, you are not able to pay your bills on time risking a decrease in its credit line or higher interest rates. That’s why having access to fast and efficient business funding or a revolving line of credit is essential for all small businesses.
Related: What Challenges Do Female SMEs Face in South Africa?
While the economic recovery from Covid-19 is well on its way, we have to understand that it’s far from over. Business owners need to take the necessary steps to plan and develop long-term strategies to survive and thrive in the ever-changing global economy. Taking the time optimise business operations will go a long way in determining the success of the organization in the long run.
Reading Time: 2 minutes
The latest guide in our Business High Five series, The SME Guide to Cash Flow Management offers practical guidance on building and maintaining a healthy cash flow.
Some of the important questions our guide answers include:
The Importance of Cash Flow Management
Cash Flow Management is the process of monitoring, analysing, and optimizing the net amount of cash receipts minus the cash expenses. As a business owner, understanding your cash flow gives you clarity over your monthly cash needs, and can also help identify the sources from where these can be met.
The three main areas we’ll cover are:
- What cash flow management involves
- The benefits of cash flow management
- Documents you’ll need when analyzing your business cash flow
7 Ways to Manage your Business’s Cash Flow
Having an effective cash flow system is the heartbeat of any successful business. This is especially true in a business where managing cash flow between different projects can mean the difference between success and failure of your business.
We’ve put together a few tips and tricks that could help you manage your cash flow to ensure your business remains profitable across all projects.
- Understand your customer
- Do a cash flow forecast
- Be realistic about your profitable estimate
- Negotiate contract terms in your favour
- Always check Change Orders
- Be strict about collecting payments
- Close the project
8 Cost-reduction Strategies for Better Cash Flow
As a business owner, you’re always looking for ways to reduce costs. Of course, cutting costs helps you boost your cash flow. And when you’re running a business, you know cash flow matters. Business owners regularly tell us a steady cash flow means their businesses can thrive. Negative cash flow, on the other hand, causes missed opportunities and immense personal stress.
Related: The SME Guide to Business Funding
Forecasting in Uncertain Times
It’s easy to get stuck in a loop of short-term thinking when you’re dealing with sudden, unexpected, even – dare we say it? – unprecedented events. But forward planning is key because it helps you adapt more quickly as the situation evolves so you come out the other side in a stronger position.
Of course, forecasting in the midst of great economic uncertainty can feel like trying to hit a moving target. This is why it’s a good idea to plan for a number of different scenarios.
Download the full SME Guide to Cash Flow Management here.
Reading Time: 3 minutes
Reducing the cost of supplies, inventory, or business operations is common practice amongst many small business owners. Not preserving enough cash could land your business in deep waters, leaving you with a desperate call for a lifeline. Curbing your expenditure is a practical way to improve your cash flow and can be done without incurring risk to your business. Here are a few practical tips to help you achieve this.
Take immediate action
Spending countless hours worrying about your business finances is time wasted and could be best spent strategizing realistic solutions. Create a well-documented plan to engage in a cost-reduction strategy. Map out any areas in your business that could do with an overhaul or cost reduction. Avoid waiting until the last minute to implement your plans. Start immediately. That way you may have a well-thought-out strategy in place for when the leaner months approach.
Related: 5 Growth areas for your business in 2021
Think alternative energy sources
Going green is environmentally friendly, as well as a cost-saving initiative. Efficient energy solutions will help you save. According to the World Green Building Council, a green building on average saves about 25% in electricity usage. An environmentally friendly approach could seem like a less impactful method at first, but down the line, you will start to see a notable change in your finances. Create a clean carbon footprint for your SME by going digital. Print less, go paperless with online invoices or bookkeeping platforms, use energy-saving bulbs and water sparing methods on your taps. Encourage employees to actively conserve water and unplug devices when not in use. For the paper-heavy business, consider recycling. Partner with organisations such as WastePlan will ensure you get a rebate on every kilogram sent for recycling. Your business will be saving the environment, cutting costs, and making an extra buck along the way.
Get paid faster
The sooner your clients pay for your product or service, the sooner you have money in the bank. Historically, businesses have given clients 30 days to pay, however, the current trend is to afford clients two weeks or less to settle the payment. Give your clients clear notice on payment instructions, as well as the payment deadline in your service agreement to avoid any disputes. Lulapay allows you to offer your customers terms. You get paid immediately for any applications we approve. Never spend time collecting unpaid invoices again
Related: 8 Cost-Reduction Strategies to Improve Your SME’s Cashflow
Source the best quotes
You may have a long-term relationship with your supplier, and they may have been with you since day one, however, when it comes down to business, getting the best quote is what matters. If a long-term supplier is no longer offering the best deal, it’s time to look elsewhere. Comparing quotes might require extra time and effort, but in the long run, it may save you a couple of rands. Just be sure that while you’re sourcing the best quote, you’re not compromising on quality.
It is important to foster valuable relationships with your suppliers. Building a solid relationship with suppliers will put you in a better position to negotiate with them – giving you a better likelihood of them offering you discounts and special deals. Trust is an integral part of the business. Long-term trust between business owners and suppliers can open opportunities for flexibility in extending your credit from a two-week payment to a four-week payment plan. Negotiation and the willingness to accommodate one another go a long way.
Short term funding is an option
Consider short-term business funding to help your business if you are experiencing a dip in cash flow. Fast access to additional funding can provide a vital buffer during those leaner times. Look for flexible repayment plans that can help your business sustain a healthy cash flow. At Lulalend, we help SMEs get fast and easy access to business funding of up to R2 million, with no paperwork and no hidden fees. Short-term business funding ensures that you are paying the loan off quickly and not getting yourself into a debt cycle.
Reading Time: 3 minutes
There has been a permanent change in the way that people shop and, in turn, the way that businesses need to operate. In the absence of brick-and-mortar stores being open during the lockdown, as well as a general fear of crowded malls when things were able to re-open, South Africa’s eCommerce sector exploded.
According to Trevor Gosling, Co-founder, and CEO of Lulalend – a financing partner to South Africa’s small- to medium enterprises (SMEs), he has seen phenomenal growth in eCommerce businesses who have connected with them for SME financing. Between the period of October 2020 and February 2021, we saw an 86% increase in loans made to eCommerce businesses and online retailers in comparison to the same period between 2019 and 2020.
“The loans were strongly linked to growth-related requirements, such as the purchasing of inventory or the expansion of marketing,” Gosling explains.
“The reality is that South Africans have now become familiar with and are used to the convenience that shopping online provides. For those who have seized this opportunity and taken the time to invest in developing their digital offering, they will continue to see rewards in the long-term,” he adds.
Related: Move your business online by following these essential steps
One of the fundamental differentiators around eCommerce in 2021 is that, while in the past this has been dominated by retailers, the adoption and familiarity that people now have of purchasing goods and services online has meant that nearly all sectors can capitalise on this trend.
The boom in demand also allowed businesses across a variety of categories to adopt a new way of delivering their products with innovative non-contact formats – whether contactless payments or automated fulfillment systems to help curb the spread of the virus.
“Gone are the days when buying online was simply a purchase of a book, clothing item, or food. Nowadays, having a business presence online that integrates eCommerce functionality will become a lot more common,” Gosling points out.
It takes more than just setting up an online site. Gosling says that new competition emerging out of this pandemic and advancing technologies will require SMEs to incorporate innovative ways of marketing, selling, and fulfilling customer orders if they are wanting to maintain and grow their bottom line.”
Related: Lessons learnt in the pandemic are key to SMEs’ survival
This is where SMEs will need to invest. From the increase in new loan applications from eCommerce businesses that we saw, Gosling says that one of the biggest learnings from them is the need to pressure test any new technology or systems that might be brought online. “It will be important to expand capacity limits as well as invest in systems that will allow for personal, timely and automated customer interactions and sales fulfillment.”
“A secondary, but equally important, the benefit is that it’s not just about an increase in revenue. Doing so means that they are able to reconnect with their existing customer base all while expanding their brand presence to new and potentially untapped markets,” he adds.
Related: How to move your retail business online
Understanding the purchasing paths of these new online customers and ensuring that your platform provides a seamless and simple shopping experience across different devices will be critical. “For those with physical stores, it will also mean ensuring that they are experience-led and digitally connected to any eCommerce platform that could assist in generating sales after the customer has left the store,” Gosling points out.
To do this will require access to capital. “Taking on debt is often essential to business growth. Being able to invest in your business to ensure that it meets the changing needs of its customers is crucial for survival,” he adds.
“Now is the time to act. The world has changed and so have the ways that customers connect with brands. To ensure that they capture market share and emerge after the crisis as market leaders, business owners will need to start making these changes now,” says Gosling.
To help SMEs wanting to move their business online, we’ve created a practical guide that is available as a free download here.
Together with a number of industry leaders within the online retail sector in South Africa, Lulalend will be taking part in the inaugural Ecommerce Day, which will be celebrated on 10 March 2021.