Tuesday August 26 2014

How small business can sail through turbulence

By Murori Kiunga

Recently, Kenya Airways made one of the most difficult business decisions. It was forced to discontinue commercial flights to Liberia and Sierra Leone, two West African countries worst hit by the Ebola outbreak.
Before this decision was reached, there was lot of public debate on whether KQ should or should not abandon its most lucrative routes putting into consideration factors such as public health, business interest as well as shareholders interest.
Some even gave it a human face and asked whether it was morally right to isolate a brother in need.
On question that constantly came up in these debates is what you would you have done if it was your personal business? It is on this premise that I look at this issue from a small enterprise, possibly individually owned.
Fundamentally, what has befallen KQ is not unusual in business. There is always a threat of a sudden and serious obstacle — a key customer deserts, a related or unrelated strike paralysis operations, a supplier discontinues your cash cow product, a major competitor threatens to smoke you out of business, terrorist attacks or travel advisory scares away customers during peak season as is currently happening in coast region or an epidemic forces you to halt operations in you key segment as is the case with KQ.
Such unpredictable and sudden occurrences are part of businesses realities and can affect almost any business. They significantly lower turnover and profits may fall below break even and result in heavy losses.
A business owner may panic and make decisions without logically thinking about short and long terms consequences.
Common options include adjusting lifestyle and preparing your family to do with less as in case of individual owned businesses, taking personal debts to keep the business afloat, delaying paying bills and hoping suppliers and vendors will understand, institute promotion and hefty discounts to increase sales.

Other options may include pushing sales team to sell more and make good the lost revenue, institute cost-cutting measures such as reducing staff, cutting marketing and training budget and so on.
Some of these decisions may yield undesirable results and make the situation worse. For instance delaying paying bills may send the wrong signal to vendors who may cautiously interrupt deliveries, getting rid of key staff may affect the quality of service, demoralise the remaining and distress the remaining loyal customers.

With unintended consequences such as increased stress, suspicious vendors, irritated loyal customers, high cost of finance if suppliers demand upfront payment, compromised quality and customer service, low margin as a result of massive promotion and discounts, the situation does not get any better.
The best approach should be to immediately improve systems to stop losing or rather to save every coin, to make every effort to avoid losing the best customers, to improve efficiency so that there is continuous flow and timely service so as to win non customers, and most importantly, to involve and motivate staff to tackle the challenge.
Rather than cry over spilt milk, channel all your energy into doing things that can return business to profit.
Generally offering better services, looking for markets elsewhere and focusing on how you can make non customers, who incidentally are the majority, your customers are some of the best options.

Mr Kiunga is the author of The Art of Entrepreneurship: Strategies to Succeed in a Competitive Market. Email: murorikiunga@yahoo.com