Survival strategies for SMEs

From rethinking product sourcing to leveraging digital technologies, owners of small and medium-sized businesses share their advice on staying afloat in the aftermath of the pandemic. Joshua Gliddon writes.

In March 2020, Anthony Caruana, the co-founder and CEO of Melbourne communications strategy company Media-Wize, forecast a deep recession. But in spite of being in a city that endured one of the world’s longest COVID-19 lockdowns, his company has been busier than ever as other organisations scrambled to adapt to the changed circumstances.

Companies realised they still needed to spend money, do marketing and find ways to approach their customers, says Caruana. “People can’t pull back indefinitely, they have to keep building their businesses. There will always be customers who will want and need to buy goods and services.”

Customers are still buying, but there remains much uncertainty. Consumer psychology has shifted and for many sectors, the outlook for business remains challenging. The long tail of the impact of the pandemic has still to play out. JobKeeper is set to finish at the end of this month, and JobSeeker will revert to its previous levels. This means that this year will be one of both consolidation and growth for enterprise — with a sprinkling of the radical change that adversity and adaptation bring with it.

As ever, small and medium-sized enterprise (SME) owners, who have sunk their lives, energy and money into their businesses, have adapted quickly to changing circumstances in terms of customer behaviour, technology, employment and fulfilment. But it will continue to be a wild ride. Allen Roberts FAICD, founder and CEO of StrategyAudit, a consulting firm specialising in the manufacturing sector, says the evolutionary processes in the use of technology, digitisation, changing customer preferences and the geopolitical and strategic backdrop have sped up dramatically. “My sense of what has happened over the past 12 months is [that it is] an acceleration of what was already happening, but it has moved to warp speed,” he says.

Evolving customer needs

Being obsessed with your customers is a good place to start in 2021, says Renata Sguario, founder, and CEO of MaxMe, a Melbourne-based app maker specialising in teaching human skills such as clear communication, managing stress and working teams to secondary and tertiary students. “Many people are in a precarious financial situation due to COVID-19,” she says, “so they’re risk-averse.”

Customers need to see the value in what you’re offering them, she says, and you need to work closely with them to see how they are experiencing the goods or services you provide. They won’t always give feedback when you’re not doing well, so finding ways to follow up is essential. For example, a digital survey asking how the customer felt the transaction went and if there were any areas in which the experience could be improved is a solid strategy.

While price is ever an issue, customers are more aware of where their product and supply comes from and basing purchase decisions on that. Scott Harrington, director in business advisory at William Buck accountants, says customers are also looking to shop and source locally, both as a result of COVID-19 and the 2019–20 bushfires, as well as the precarious international situation. “People are becoming more nationalistic,” he says. “Also, with the trend towards working from home, customers are expecting to have an instant response to their queries. It’s not just a nine-to-five situation anymore.”

Rethink sourcing

Roberts notes the Australian business relationship with China has changed forever. Enterprises that previously relied on China to do the heavy lifting of sourcing goods and manufacturing need to rebuild their supply chains focusing on other countries — and the domestic market. “My sense is that a couple of years ago, the natural reaction of an SME when they needed to source something was to go to China,” he says, adding that the kneejerk response was to look at the invoice cost, not the total cost, where transaction and other costs were hidden. Now, companies are being forced to consider their supply chain, and the overall cost of goods, and so they’re starting to consider shorter supply chains — and using local manufacturers instead of going offshore. This means looking to local suppliers, or to where the geopolitical situation is not so fraught.

Only the flexible survive

As co-founder and owner of the Coastal Brewing Co, David Black GAICD says he was hammered when COVID-19 hit and his microbrewery in Forster on the NSW north coast lost its main source of income — the sale of kegs of beer to pubs and clubs. Along with co-founder and partner Helen, he quickly shifted his business model to selling packaged beer to bottle shops and pubs, a move that helped it to survive.

“Flexibility is the one attribute a small business needs to have,” he says. “If we weren’t flexible enough to change our business, we might not have got through the challenges of 2020. That’s the one thing I’d tell other business owners — always be ready to change your business model to something new to deal with the changes that are happening.”

Sguario agrees with this strategy. “Don’t be afraid of trying new things,” she says, noting many business owners tend to stick to what they know, when in fact disruptors are coming at every business from every angle. “Don’t relax into thinking that doing the same thing you’ve always done will help you survive,” she says. Instead, brainstorm and think of innovative ways to “surprise and delight” your customers.

“Sometimes, customers don’t know what they want until you put it in front of them,” says Sguario. “That’s when you build a customer who is loyal and will keep coming back.”

Develop a global mindset

Rob Bromage, founder, and CEO of ASX-listed Brisbane cloud software company IntelliHR, says: “Don’t think local, think global.”

With the borders closed and employers dealing with the challenge of remote workforces, his company focused more deeply on global markets. Bromage says he knew it had to diversify and be “agnostic” with its software. This strategy has doubled the size of the business in six months. With 70 staff, IntelliHR now operates in 16 countries.

Bromage says that flexibility is the best attribute an enterprise owner can have. It helps not to be too parochial when it comes to looking at where you are selling your goods and services. “Think about the industry you’re serving — in difficult times, as a small business owner, you need to do 10 times as much if you are going to survive,” he says.

Re-evaluate

In times when everything seems like it needs doing at once, it’s also important to pause and reassess, says Mellissa Larkin, founder and managing director of Adelaide SMB law firm, Peripheral Blue. “The pandemic gave us an opportunity to reflect on where we were at and whether, given the opportunity to do things again, we would do it differently,” she says. “As a business owner, you have people’s livelihoods relying on you being able to swing the business model around to survive — and enable them to maintain their own family and lifestyle commitments.”

Customers want to see value for money and quality work. For her business, the trusted adviser role hasn’t changed. The company had minimal investment in office space and leases, and already used collaboration software such as Zoom.

“You don’t need all the bells and whistles in terms of office space and the like,” says Larkin. “With people forced to work from home, it’s made many businesses reflect on what they need when it comes to offices and infrastructure. The reality is that working flexibly is a better fit for many employees and the organisations that employ them. But you need to have systems and operations in place to give you the flexibility to adapt.”

Despite the increased reliance on digital forced by the pandemic, customers in essence, still want the same things, says Roberts. “What we want and need hasn’t changed. It’s just the means by which those things are delivered has changed. Bricks and mortar aren’t going away, and those stores have the opportunity to provide an experience — touch and feel — that digital simply can’t match.”

Digital dexterity

The key to success in 2021 is being able to leverage digital marketing and digital technologies, emphasises Harrington. “The businesses that were most successful in 2020 were those that were agile and quick to adapt," he says. "The key is to be clear about what you want to achieve with digital.”

Some businesses won’t be suitable for ecommerce, so it’s essential they use digital to connect with customers and to maintain that connection. “In today’s world, you can Google things, watch YouTube videos or listen to a TED talk,” says Harrington. “Businesses that want to connect with their customers can create YouTube videos that show those customers how to do things, how to make their lives better. This creates a link between business and customers.”

A strong content strategy lets you connect with customers, even if you’re not an ecommerce business. Customers are hungry for content that makes their personal and work lives easier and more fulfilling. A solid content strategy can cement your business in the customer’s mind as the go-to place for this information. This means digital is a core part of your business’ survival package.

But Roberts warns there is a danger of relying on digital too much. “In the 1990s, no-one asked how important it was to have a telephone strategy,” he says, adding that it’s a matter of relying on your depth and wisdom as a business owner and leveraging your experience to pivot the business model rapidly in times of change.

Employee fallout

According to Bromage, in 2021, wellness and awareness of staff wellbeing are the most important things employers can take into consideration. “People are still struggling. The question is: how do you look after your staff? How do you change the work environment and operate a hybrid work environment?”

Some people enjoy working from home while others rely on the office for social interaction. Getting together for Zoom drinks on a Friday afternoon is not the same as the weekly flesh-and-blood catch-up. And while flexible working arrangements dominate the conversation, not everyone gets to work from home. Trades and manufacturing simply can’t work at home. They have to go to a work site or factory to get their jobs done. This is something that needs to be included in the current national conversation about new ways of working.

Bromage says he’s not seeing a lot of churn when it comes to employment, but this could change as the economy gets back on a more even keel. “When people start feeling better about the world and their future, this might change, but knowledge workers will want to maintain their flexibility. Employers who are not respectful of this will see turnover.”

Ongoing support for business

There is a raft of support for SMEs, but this is slowly winding down. Economist Saul Eslake says that while government programs such as JobMaker and JobKeeper have been effective at maintaining employment, 2021 will see a shift in emphasis towards nurturing businesses more likely to be sustainable in the post-COVID-19 world.

Eslake is not in favour of giving tax preferences or subsidies to small business enterprises simply because of their size. “It is simply not true that SMEs are the engine room of the economy,” he says. “In aggregate, they have created far fewer jobs over the past five years than larger businesses.”

Instead, Eslake would prefer to see programs such as the lower company tax rate and the payroll tax exemptions at the state level replaced with preferences for new businesses. His reasons for this include the fact that new businesses are more likely to be operating in sectors with a sustainable future; they are more likely to create jobs and more likely to innovate.

“Although most new businesses will be small, most small businesses are not new,” says Eslake. “So, there will be far fewer businesses eligible for preferences if those preferences are only available to new business rather than small ones.”

He notes this emphasis on new businesses means that preferences can be much more generous — such as a company tax rate of 10 per cent, rather than 25 per cent — and hence more effective.