Tips to ensure survival during the economic downturn

In light of the current economic downturn, and pressure on the owners and DPs of independent dealerships, Dealerfloor recently spoke to Prof Tommy du Plessis from North-West University’s Business School; an expert on entrepreneurship and small business management.

Tommy du Plessis

According to Prof Du Plessis, the economic impact of the COVID pandemic affected small business organisations most. “Under regular circumstances it is a struggle for any businesses to survive, but the current situation is unprecedented. It is in fact the small-, micro- and medium-sized organisations (SMMEs) that are worst affected by the current conditions,” he said.

However, he is still optimistic and said that many entrepreneurs will see an opportunity in every situation, no matter how bad the circumstances. “Fortunately, it is the smaller, independent businesses that can adapt easier by placing an emphasis on getting the right quantity of stock and dispose of it quickly,” Prof Du Plessis added.

The current economic circumstances will test the small business sector to the extreme, and if owners and managers don’t do the basic things right, they too can become part of the statistics. According to him, there are certain aspects of the business that should be managed efficiently and effectively, including employees, marketing and cost to ensure survival:

Staff – your greatest asset

For many, the possibility of retrenchment and/or the temporary downscaling of employees, are inevitable and, of course, a sad reality. It is crucial to make sure loyal and dependable employees stay on as long as possible. Prof Du Plessis said the fact that your employees are often recognised as an asset and strong point can never be overemphasised.

“Don’t let key employees go, as you may be forced to go and recruit new ones in a couple of months. I am an advocate for sub-contracting, as you will keep your expertise and in most cases, save on costs like pension contributions, leave benefits and medical aid contributions,” he said.

He continued by saying how important it is to keep employees informed, thus keeping nasty rumours at bay, and to investigate the possibilities of temporary, reduced salaries to keep essential employees. “Since the clients of a business usually experience service from employees, I think it is a good idea to ask your staff how they will keep up the good service in these times and build on that,” he suggested.

Tips to save costs

As an owner and entrepreneur, many experience a point of hopelessness and start exploring the possibility of closing the doors of the dealership. But, according to Prof Du Plessis, this is the point where it is paramount to have a rethink in ways to save even more on costs and overheads. He suggests that one, or more, of the following tips might just be a dealership’s saving grace:

  • Every business must have a budget for operating costs, which should be analysed, compared and adapted on a regular basis. Take every expense and try to minimise that cost without jeopardising the performance of the business.
  • If there are unused office, workshop or floorspace, make it available for rental. Investigate the possibility of leasing out unused copiers, printers, computers and even desks and other office furniture to another business. Remember, many entrepreneurs are currently also starting new businesses and are looking for cost-effective ways of doing that. Be creative about re-utilising space and equipment to generate a new income stream.
  • Keep your stationery cabinet locked! This is an expense that can easily eat away at profits. Ask your employees to be mindful of unnecessary wastefulness with stationery.
  • Start printing on both sides of documents meant for internal use. Develop a strategy to convert to a paperless environment.
  • High, private telephone costs can play their part in the demise of any organisation. In most cases it is not an employee benefit to make private calls from work. In these times, it can be beneficial to get detailed statements and to scrutinise them often.
  • Revise the short-term insurance policies regularly. It is good practice to regularly get quotations and compare them to current premiums. Go over every asset on the policy schedule and make sure it correlates with the asset register of the business and update if any assets were sold, traded or written off.
  • Think twice before replacing any assets. Consider to extend the lifetime of equipment with, for example, a good service.
  • Instead of using the most convenient courier service, compare costs before making an informed and cost-saving decision.
  • Be accountable for switching off the lights, computers and air-conditioners at the end of every day and make someone responsible for it. Saving energy is tantamount to saving money.
  • Plan and restrict travel and accommodation expenses. Attending seminars and training sessions can now be done easily via the Internet, saving costs and time.
  • Negotiate better terms with your bank. Always be on the lookout for a better deal with the bank or your suppliers.
  • Does the advertisement succeed in getting noticed?
  • Does the content provide a solution to a need or problem?
  • Does it arouse the interest to investigate more about the business?
  • Does it succeed in generating the desire to buy?
  • Will it call the prospective customer into action?

Be Creative

Creativity is one of the most important characteristics of an entrepreneur, leading to many innovative ideas defeating the many challenges they face every day. Apart from creative solutions, entrepreneurs will usually think bigger and better.

According to Prof Du Plessis now is the time to be creative and surprise the market and customers. “It will be worthwhile to include your employees in generating new ideas as well, since they are, in most instances, just as close if not closer to your customers, understanding their needs and expectations,” he explained.

“By involving your employees in generating ideas to save costs, to save electricity, improve service delivery and to save on operating costs, it becomes everyone’s business to save the business,” he said.

He suggested that business owners and DPs can ensure a successful advertising campaign with the following questions to customers, usually providing valuable insights:

In conclusion, Prof Du Plessis believes that most dealerships should be able to weather the storm, provided they cut costs, focus on creative solutions and keep their customers happy.

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