Running a business in South Africa is becoming increasingly tough, amid stagnant economic growth and ever-increasing operating costs, such as rent, labour costs, fuel and electricity.
While the country achieved a 3.1 percent GDP growth for the second quarter of 2019, economists expect the country’s economy to slow down in the third quarter. It is therefore vital that business owners keep their finger on the pulse of their business’ financial position in order to spot negative trends early enough to turn things around.
The first step to turning a business around is to identify and understand the core issues impacting negatively on the performance of the business. There are internal factors, which a business has more control over, as well as external factors – both of which impact a business and should be considered.
When it comes to external factors – such as fluctuating exchange rates and changes in the political and economic landscape – while you may have little control over them, you can do your best to adapt.
Whether positioned as competing on price, quality or customer service, ensure the business is delivering on its promise and is top-of-game within its industry. Regular industry research is important and benchmarking to ensure that the business is still relevant and not falling behind its competitors.
Any changes to the industry environment will have a knock-on effect, so surveying and adapting is key. For example, if you rely on importing goods and the exchange rate changes to your disadvantage, increasing import costs, you can look to buy locally instead.
Regarding internal factors, a business owner should start by assessing whether the company has the necessary skills, expertise and competence to succeed. It’s important to ask yourself questions like ‘does the business have the right people in the right places?’
To be able to understand what the issues truly are, it’s also important to listen and engage with staff on all levels – particularly those who have been at the business for a long period of time. Effective communication channels for employees’ grievances, staff performance reviews and even suggestions around innovation are vital to help identify areas of improvement.
Only once you have located whether it’s a people issue, a process issue or a resource issue, can you can start to develop a strategy to implement to turn the business around.
For this, I suggest including a formal business plan, including a cashflow forecast to make sure you have the adequate capital and liquidity to execute the strategy, under reasonable and realistic assumptions. However, successful implementation can only be achieved once all the business stakeholders are on board. Those who need to be informed include employees, customers, creditors, financiers, investors, and where applicable, the receiver of revenue.
If you believe the business is fixable, with hard work, proper planning, a well-defined and executable strategy and the best people beside you, it is possible to successfully turn it around.