Business management for SMEs

Opportunities are aplenty for business–building within the economic 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 that were mooted due to the crisis, into legitimate businesses in the recent months. The majority of new Malaysian businesses that opened recently are in the food and beverage sector, with online retail shopping following closely behind. The view of starting a business as an innovative venture has turned into a necessary capability for long-term success. Let us look into the management factors for business success and explore how 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 as a direct result of the government’s 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 nature of the business. SMEs can digitalise by identifying their existing capabilities that create a competitive edge and implement complementary digital capabilities to remain sustainably differentiated for the future. The accelerated digitalisation also led to an increased need for cyber security, data protection and privacy measures. After all, In the digital economy, the growth of a company is largely dependent on its stakeholders’ trust in its digital presence.

2. Financial Management

For effective financial management, it is advisable to separate personal and business transactions from the business banking account. A separate business account not only makes it easy to monitor cash flow, it also offers a convenient touchpoint to manage customer and supplier transactions.

Standard accounting techniques encourage the common belief that growth is the only path to business success. However, at times, shrinking the number of offerings can be a better way to achieve a higher return on investment. This can be done by analysing each product line, its cost allocation and margin, then determining 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 is always a safer approach than seeking new funds for expansion. SMEs can utilise budgeting tools to better understand their current cash position and cash flow projections to make more informed decisions. 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. The time required for the business to get cash, as well as the opportunity cost of utilising the cash for business investments both have to be considered when securing the right amount of cash as a 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 environmental, social and governance issues. A company led with a strong purpose in one of many of these areas can greatly improve its recruitment and retention, as well as become stronger at attracting and building a loyal consumer base.

Upskilling has become more important as job roles become increasingly impacted by rapid changes in technology and the business environment. SMEs can develop and implement training programmes that are able to deliver business value by assessing the skill gaps of the current workforce with relation to its environmental 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 consider using human capital management software like SAP SuccessFactors, Workday or BambooHR to manage workflow, payroll, training and performance tracking and keep productivity in check.

4. Product Development and Marketing

Most businesses have their own definition of their products’ value, but this may differ from their customers‘ ideas on what is most important. It is therefore important to obtain customers’ viewpoints on the product, its quality and price to understand and deliver stronger 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 a target customer segment mix and form the optimal set of differentiated products to grow market share. Such tools also offer consumer insights that can help to capture high-margin business share. Businesses can also boost their 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 of the effectiveness of their website content and marketing.

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 have to redesign customer journeys and touchpoints in order to meet new desired needs such as convenience and speed to retain customer loyalty. For businesses operating in the retail or food and beverage sectors, implementing a cloud-based POS system helps to accomplish this by providing remote access to the business store and integrating consumer, supplier, and inventory management in one central place. Using POS data in supply chain can help increase the 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 in physical stores, all from the convenience of smartphones or tablets.

In conclusion, it is now apparent that the growth of existing SMEs and the continued creation of new SMEs are drivers for economic growth on a global scale. Along the developmental stages of a business from establishment to its maturity, the key success factor is management. The management system of SMEs should ideally 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 goal is impossible with a feasible strategic plan in place.