Stagflation and exchange rate volatility impact business plans. While, small and medium-sized businesses must tighten their belts. The keys to growth, despite the context.
By Facundo Sonatti
If Argentine entrepreneurs are trained in anything, it is driving on winding roads. It merits more attention and adjusts the belt to avoid a drastic impact. Federico Baigun, co-founder of Reina Batata, a boutique bazaar chain, postponed new store openings and reduced a 10% your staff this year. “Because of inflation, we adjust both prices and costs as real as possible to be competitive and continue to handle the volume we want”, ensures and adds that, to make it, it is key to monitor the numbers and against the deviations that are presented, adjust course quickly, to maintain business volume or gross profit.
Para Sandra Felsenstein, director of the consultancy for SMEs Dinka, in times of crisis, it is natural for the smallest girls to retract their expenses and investments and implement saving measures. On the other side, many times, it happens that the need leads companies to search for efficiency, which could be the positive aspect of these situations (see box).
“By reducing costs, it is essential to try to simplify the processes. Not only to reduce the company's expenses but also the superfluous ones that do not generate added value to the final product, increasing the cost, and with it, the price. This means minimizing internal bureaucratic processes that use time and resources that do not translate into advantages or benefits for the consumer.”, recommends the specialist.
“We audit all areas to understand where we could improve to be more profitable. Advertising and external consulting expenses were further relegated”, reviews Gisella Djenderedjian, CEO of Dvigi, the purifying firm he inherited from his father and increased a 60% your actual sales so far this year. At the beginning of this exercise, the company hired online advertising consulting services. “Around mid year, we train a person from the team to carry out this task. We managed to internalize concepts, reduce consulting costs and improve results in a 40% (advertising sales / investment)”, detailing.
Gabriel Fame, in front of the Cadore ice cream parlor, states that the situation forced him to reduce a 15% your staff in low season. Wages represent the second component of costs for the company. “We signed an agreement with 35% of rise with the direct incidence on social charges, ART, social works and union contributions”, Fame points out and affirms that, despite the progressive decline in profitability, sales volumes are maintained.
Cadore became famous based on an artisan product, in the epicenter of cinemas and theaters of Buenos Aires in the late 50's. Today, It continues in its traditional location on Corrientes Avenue and produces more than 30.000 kilos per season. “Quality and craftsmanship, the dedication we put into crafting, sets us apart and keeps sales volumes down. Without forgetting the recommendation of our ice creams by word of mouth”, adds the businessman.
“Our main activity, Temporary Staff, is an indicator of the moods of the economy. When tail winds blow, we are the first to upload, and when you feel drizzle, we are one of the first cut lines of our clients. So, we have to have a lot of waist in difficult times and everything that is not a critical expense, regardless of area, is thoroughly checked”, José Ignacio de Artiagoitia launches, founder of Two Eventual Services, human resources consultant, founded more than 20 years, with 300 temporary employees and a turnover of $ 35 millions.
“In this area, keeping financial indicators in order is key. By not handling raw materials or stock, we cannot defer payments to suppliers: the most important expense line, and therefore critical is that of Salaries”, explains the businessman. “Thus, we started with a strong work in the collection management and cash flow management. Companies' payment chain feels heavier, so the cash flow became a critical factor”, add.
“One action that triggers these types of periods is stagnation in the hiring of personnel and, sometimes, the subsequent dismissal of employees. In many cases, SME owners evaluate this the same way I can do it, can I start taking more tasks from the company, etc. You have to be very careful with this, and don't forget that the entrepreneur's time is worth a lot, it has a very high opportunity cost, and that it is essential that he does not abandon his dedication to the elaboration of company strategies to dedicate himself to operational tasks”, advierte Felsenstein.
“The fiscal pressure is very important and the financing lines are cut more and more. However, we hope to meet this year's budget and, in the best case, add clients”, share from Two Eventual Services.
- Contraction in investment in advertising and marketing. SMEs use tools that allow managing the relationship with customers without the need to invest too much
- The two sides of the inventory. In some cases it is decided to decrease the stock. Conversely, in other firms, the constant increase in its replacement costs generates increases in the stock. This depends on the financial capacity of the firm..
- Desperation to sell more. It is common to see entrepreneurs trying desperately to increase sales to offset the decline in results. The focus should be on optimizing the performance of SMEs.
- Source: Dinka