Business Management for Small and Medium-sized Enterprises (SMEs)
Opportunities are aplenty for business building within the gaps and vulnerabilities highlighted by the COVID-19 pandemic. To address consumer behaviour shifts and overcome pandemic disruptions, many individuals and companies have turned ideas mooted due to the crisis into businesses in the recent months. Majority of new Malaysian businesses that opened are in the food and beverage sector, with online retail shopping following closely behind. The view of starting a business as an innovation on the side has turned into a necessary capability for long-term success. Let us look into management factors for business success and explore strategies including looking at how digital tools can help nurture business value and growth.
1. Digital Adoption
Rising in tune with business building is the accelerated digital adoption of businesses caused by the Movement Control Order. Many businesses have flocked from bricks to clicks by offering their existing products and services onto online marketplaces, such as Lazada, Shopee, Mudah.my and Carousell. E-commerce platforms like Shopify and EasyStore offer the essential tools a business needs to sell online and to manage its multiple sales channels.
Embracing a digital strategy can reposition a business to a more advantageous position through additional revenue and cost-saving benefits. The possibilities and degree of digitalisation will be dependent on the business nature. SMEs can digitalise by identifying their existing capabilities which provide competitive edge, and implement complementary digital capabilities to remain sustainably differentiated for the future. The accelerated digitalisation also meant increased attention to measures for cyber security, data protection and privacy. In the digital economy, the growth of a company is also dependent on the digital trust by its stakeholders.
2. Financial Management
For effective financial management, separate personal and business transactions from a business banking account. A separate business account can help monitor and track transactions and cash flow, as well as improving convenience in managing customers and suppliers.
Standard accounting techniques encourage the common belief that growth is the only path to business success. Sometimes shrinking the number of offerings is the best way to achieve a higher return on investment. This can be done by analysing each product line, its cost allocation and margin, then determine whether they are contributing or dragging down business growth.
When growing a business, owners should pay attention to their balance sheet rather than just gearing operations to their income statement. An optimised account receivable can be a source of cash whereas hidden capital can be found from fixed assets. Focusing on cash flow and optimising the productivity of capital employed are always safer than seeking new funds for expansion. SMEs can utilise budgeting tools to help make informed decisions by understanding their current cash position and cash flow projections. SMEs can also look to accounting software like QuickBooks and FreshBooks to track profitability, manage invoicing and improve receivables. Through reliable indicators of future cash needs, SMEs can set up a cash buffer against the potential impact of a prolonged emergency. Both the time required for the business to get cash and the opportunity cost of utilising the cash for business investments have to be considered for securing the right size of cash buffer.
3. Human Capital Management
Studies have shown that a diverse workforce and inclusion strategy can elevate profitability and growth. This can be achieved by practicing empathetic leadership and establishing a sense of belonging for everyone. Employees and consumers look for companies that do not just create value for its stakeholders but also manage societal obligations regarding environment, social and governance issues. A company led with a purpose can improve recruitment and retention, as well as attract consumers and build loyalty.
Upskilling has become more important as job roles are impacted by rapid changes of technology and environment. SMEs can develop and implement training programmes that are able to deliver business value by assessing the skill gaps of their current workforce to environment challenges. Apart from technical and digital skills, soft skills such as curiosity, creativity and adaptability too must not be disregarded for business growth. SMEs can also utilise human capital management software like SAP SuccessFactors, Workday and BambooHR to keep productivity in check by managing workflow, payroll, training and performance tracking.
4. Product Development and Marketing
Most businesses have their own definition of their products’ value, but customers may have different ideas on what is important. It is helpful to obtain customers' viewpoints on the product, its quality and price to understand and deliver value. If a product is not sufficiently differentiated, it will lead to price competition and lower profits. After identifying the value of a product by its quality and price, SMEs will have to decide on the type of marketing and media channel to promote the product.
A business will have a higher chance of success if product development goes hand in hand with marketing. For online businesses, digital marketing tools can be utilised to identify customer segment mix and form the optimal set of differentiated products to grow market share. Apart from that, improved consumer insights from these tools can also help to capture high-margin businesses. Businesses can also boost its online presence through content marketing on social media, which also helps build consumer intimacy. Social media management tools such as Hootsuite and Sprout Social can help businesses make better informed marketing strategy through social content management, social analytics and social listening tools. SMEs can also use Google Analytics to gain a better understanding on their website and the effectiveness of their marketing, content and product.
5. Supply Chain Management
The value enhancement of supply chain management goes beyond operational efficiency improvements and cost reduction, it also provides a competitive edge by delivering superior value to consumers. By placing priority on inventory management, businesses can free capital tied up in inventory and improve supply chain responsiveness. The short-term goal of supply chain management is to improve productivity by reducing cycle time and inventory, whereas the long-term goal is to enhance market share and consumer satisfaction.
As consumers become more digitally savvy, SMEs will also have to redesign customer journeys and touchpoints in order to meet new desired needs, such as convenience, speed and loyalty. For businesses operating in the retail or food and beverage sectors, implementing a cloud-based POS system does not just provide remote access to the business store, but also integrates consumer, supplier, and inventory management. Using POS data in the supply chain can help increase reaction speed of adapting stock levels and production to demand. SMEs can opt from many software providers such as Vend, Loyverse and Kyte to easily manage their business both online and physical from smartphones or tablets.
The growth of existing SMEs and the continued creation of new SMEs are drivers for economic growth on a global scale. And along the developmental stages of a business from establishment to its maturity, the key factor is management. The management system of SMEs should be simple and flexible, optimised to ensure competitiveness and to deliver high value to its customers. From becoming a remote service provider to innovating online retail experiences without the physical element, no idea is too small with a feasible strategic plan.
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