As the Namibian economy continues to navigate economic challenges; the knock-on effect on consumers is one of the main issues keeping new SMEs awake at night.
Sam Ikela, Head of SMEs at FNB Business says, “despite the resilience of the SME sector; new franchisees are cautiously observing the economic headwinds and their anticipated impact on profit margins.”
Ikela shares some key challenges faced by new SMEs:
Managing cash flow: The slowdown on the economy is making it very challenging for new SMEs to remain profitable – this means they need to adapt to this tough economic climate by managing their cash flow efficiently, because it plays a critical part on the health of a business. Furthermore, they also need to build a closer relationship with their financial institutions; this will improve their working capital and also carry them through the tough economic times.
Electricity costs: Prioritise and invest in electricity efficient products and machinery early on in the business; this will save you a lot of time and money in the long run.
The rising cost of rental space: Always keep in mind that rental costs go up on a yearly basis, when doing budgets factor in the probabilities that the rent will increase.
Staff costs: Having less money coming into a business simply means little profit margins which implies keeping fewer employees in the business to sustain it. Increase your staff complement only as the business grows and economy improves.
Not having suitable skills – New franchisees often get anxious that they don’t have the necessary skills to operate the business successfully. They can eradicate this anxiety by looking for mentorship and guidance from an experienced business owner.
“Given the unpredictability of the current economic climate, the sector still has room to grow despite the shrinking of disposable income for many consumers. Small businesses have a wide range of supporting structures that can be used. Use these structures effectively, and speak to FNB to see where we can assist you, because your success is our success,” concludes Ikela.