Plan for business challenges

With increasing interest rates, fluctuating petrol prices, drought, lagging trade payments, and the credit crunch, planning for business challenges is a must for SME survival. Here’s your guide to expected business hardships, together with some expert advice to ease business conditions.

Blow after blow has been dealt to SMEs, everything from a strengthening Aussie dollar, to the climate change debate—most of which were completely unexpected. So take a forward look at what awaits businesses this year, and create a business plan to keep yourself from being knocked out.   

Interest Rates

With more interest rate rises expected, it is not surprising that business owners are uneasy. Dun & Bradstreet’s September and October Business Expectations Survey revealed interest rates are seen as the most influential pressure on business in the upcoming quarter, by 36 percent of executives, with interest rate concerns at their highest in two years. “It is evident that rates will remain a key concern for SMEs in 2008,” says Christine Christian, Dun & Bradstreet Australia CEO.

One option available to small businesses, to protect themselves from further interest rate rises, is either full or split fixing loans. And with most financial institutions not charging additional costs to fix loans, it’s an increasingly appealing option.

“Businesses will also be affected by the tightening of credit that has resulted from the US sub-prime fallout. SMEs will find credit harder to access and more expensive,” says Christian. Delayed trade payments are expected to increase as a result. “SMEs could see considerably reduced business cash flow and impacts to resources, as staff are required to recover overdue amounts or are pushed to increase sales to make up the shortfall.”

Trade, Export & the Aussie Dollar

SMEs make up almost 90 percent of Australian exporters, according to the Australian Bureau of Statistics (ABS). What can they expect in the coming year?
“In 2008, we are likely to see the major capital investments in the resources sector come through into the export data, so if you think the resource export numbers are big now, you ain’t seen nothing yet,” says Tim Harcourt, Austrade’s Chief Economist.

But while the resources boom continues, agriculture and manufacturing exporters will be constrained by the ongoing drought and infrastructure hold-ups.

Also concerning, especially for exporters, is the Australian dollar which is at its strongest since the 1980s, surpassing 90 cents in October. “It’s not at all good to see our Australian dollar getting stronger and stronger. It makes it that much harder to be competitive,” says Martin Brook, co-founder of Brookfarm, gourmet food manufacturing company. “We’re actually beginning to hedge currency.” Despite the rise, Brook is adamant they will maintain the quality levels of their exports.

“The majority of out exporters don’t let fluctuations in exchange rates ruin their business plans,” says Harcourt. “They see the moving exchange rate as a fact of life of operating in the global economy and make their decisions based on long-term plans and building strong relationships with clients, customers and business partners.”

So the future is not so glum, but future plans should take into account infrastructure and skilled labour shortages.

Staffing Solutions

An Australian Institute of Management (AIM) survey found 51 percent of senior managers believe the skills shortage is the greatest risk to their business. Not surprisingly, staff retention has become a necessity, and the number of part-time workers has risen to form one-third of the Australian workforce.

“For employers to solve the existing employment shortfall it is important for them to explore part-time, job share and flexible employment options. They should look to target sections of society that have traditionally been neglected by employers,” says Liana Gorman, Part Time Online director. “Offering this potential workforce flexible working conditions to suit their lifestyle, will help alleviate employee vacancies in all skill areas and help retain staff in the longer term.”

Staffing solutions are not always difficult. Like other SMEs, Brook finds hiring the right staff to be a challenge, but unlike others, he has little trouble retaining staff. “Our goal was to create an environment where people really wanted to come and work with you. Also a very empowering environment where people may come and start at the bottom, but we work with people to bring them up in the organisation,” he explains. “We really want that feedback from the people who are at the coalface doing the job everyday. And the other thing is really valuing the people who come to work with us.” Creating relationships with staff, based on trust, is an important retention tool. Both business and business owner will benefit.

Outsourcing is also a useful staffing option. Doing everything yourself will only leave you burnt out, especially in areas you don’t have experience, including PR, marketing, advertising and accounting. Trust others to pick up some of the slack.