[Opinion] Times getting tougher

[Chatmaster]

Is it just me or is there a clear indication that businesses are starting to close down one after the other. In the past few months I have been consulting with several businesses in the Johannesburg and Pretoria areas, and it is shocking to see how many are seriously considering closing doors. It is also clear that the NCA has a clear effect as more and more Estate Agents, Car dealers, Attorneys, bond originators, property developers, builders and other businesses are either down sizing or closing down.

The rollover effect onto other businesses are also taking it's toll as more and more business are finding it tough to make ends meet.

In terms of the general economy slowing down and the petrol price crunch and interest rate increases it seems that everyone is starting to byte the bone, and many businesses are struggling to make ends meet.

Yet there are those few businesses that are doing better than ever despite all these crunching factors.

If my observation is correct, and I am pretty sure it is, what qualities is it that are needed to make a success of your business when it appears to be "hard times"?

[Dave A]

Definitely not your imagination, Roelof. Although for once I suspect Gauteng has been lagging behind what has been happening in other parts of the country for a little while now.

Doing well in tight times is about having the capital to take advantage of the bargains that start floating up. But for many, liquidity just isn't there to take advantage.

So when things are tight, I see two opposite reactions.

One is to increase marketing to increase market share to compensate for the particular sector's drop-off (sell your way out of the problem). The problem I see with that is in tight times, the cost vs return is worse than in good times. Unless you're getting smarter with your marketing, that new market share is a much more expensive buy than in good times. And if you are doing it smarter, why didn't you do that when times were good anyway?

I reckon for the drowning man, most times this just makes the final drowning come even quicker.

The other way is to cut back on costs (particularly overheads) to weather the storm (save your way out of the problem). Personally, I favour this approach, but it comes with tough psychological barriers and requires severe self-discipline.

First prize in stormy seas - batten down the hatches, build up capital reserves and buy up your competition's flotsam as they sink.

So far we've managed to reduce the effect by "skirting the storm." This has been done by shifting marketing focus on client sectors that have not been as badly affected so far as so many others.

[Dave A]

I've just had a flood of thoughts on this subject prompted by the question about unpaid employees' salaries.

What innovative ideas are there for getting a business through tough times?

Tongue in cheek, I was thinking - the staff offering to take a pay drop.
This led to the thought - you could offer a pay drop for shares in the company?
And then it struck me.

A lot of externally financed BEE deals are going to be in real trouble at this rate!

Anyway, has anybody got any "think outside the box" ideas for struggling businesses to get through tough times?

[murdock]

i got an email yesterday...the phrase "like rats jumping off a sinking ship" the way people are running from this country.

there is gona be nobody left here...only me and whats left of my family...my other sister is leaving in a couple weeks time...another customer is leaving shortly...i am not gona have any customers left i will have to move to aussie to get my customer base back again...lots of my friends have already left there is only a handfull left and even the majority of them are considering cut their losses and bailing before this country really falls apart.

i was discussing leaving this country with another customer today and he was saying he i also getting his things in order to leave soon...and asked me why i didnt want to leave...he mentioned how he has had 2 armed robberys...he had the front door of his house bashed in trying to break in at 4 am while he was in the house with his family...his wife and 3 year old daughter were attacked in the house a couple weeks ago which has made him decide it is time...you have to think of the future of your children...we have had good times here but a young female growing up in this country.... eeeish.

i heard a while back not even a male is safe anymore...a male was hijcked and raped...and people say you need to be positive.

[Dave A]

A lot of externally financed BEE deals are going to be in real trouble at this rate!

As predicted...

Black economic empowerment (BEE) investors have seen hundreds of millions of rands wiped off their equity values because of recent market disruptions.

Corporate finance experts and analysts confirmed yesterday that the market turmoil would make it tougher for new BEE deals to be concluded using third party funding.

Banks had adopted stricter lending criteria in light of market volatility, they said.

Some BEE investors would be hard hit because of the debt they incurred in striking deals. This would make their equity exposure more sensitive to share prices, said analysts.

All market sectors have been affected, with resources hard hit in recent weeks.

Imperial, MTN, Barloworld, Sasol and Old Mutual have been identified as high-profile companies whose BEE deals were either already in distress or were headed for trouble.
full story from Business Report here

Welcome to the mixed pleasures of ownership!

[wynn]

Ja!, that was a question asked on 'that other forum' when BBBEE was being discussed, While the economy is booming you are being forced to share the benefits, but when recession hits will you recieve a fair share of support?'

Well the chicken has well and truly come home to roost, so wait and see, even our new President is grumbling.

[Dave A]

but when recession hits will you recieve a fair share of support?'

Like pay decreases instead of increases?

[murdock]

Like pay decreases instead of increases?

i would like to see this...i see the reaction you get when you dont increase the salary by the amount they want ...imagine if you decrease the salary

my problem is not finding the work and keeping busy...it is getting the customer to part with his money...at the moment i am only working for customers who i know will pay me on time...i would rather do 10 jobs and get paid than do 50 and have to wait 90 days or more for my money...i only need to work for 8 days to cover all my overheads at the moment and the bonus with me is i can do all the work myself.

this is not the first time things have got difficult...as i have mentioned before... i have seen lots of companies open and close in the 17 years i have had my companies...i have also watched how some people who live like ordinary people...drive the same car for 10 years....live in the same house no matter how much money they make...they dont keep up with the jones and i see them now still living in the same house but their lifestyle doesnt change during the hard times.

the moral of the story is when you make 1 million rand dont more to umghlanga and buy a house for 2 million and a car for 1 million put your kids into the most expensive private schools...etc etc...rather buy yourself a brand new car for 2 hundred thousand...a house for 3 hundred thousand and put the balance in a secure saving account where when you get to 50 the brokers doesnt tell you that because of the markets 20 years ago your money is not worth the paper it is written on(i am hearing of this happening a lot lately)