Every year, a lot of small and medium scale enterprises flood the market worldwide with new product solutions. This is common in developing economies like Nigeria where SMEs represent about 90 per cent of employment across the globe, the World Bank says.
According to the Nigeria SME Survey, the SMEs contribute 48 per cent to the national Gross Domestic Product, account for 96 per cent of businesses and are responsible for 84 per cent of employment.
Despite the glaring impact of the SME markets for a country like Nigeria, stakeholders in the industry have continuously lamented setbacks in overall business profit.
Other recent adverse effects on the SMEs resulted from skyrocketing inflation rate, and cash crunch crisis from the Central Bank of Nigeria’s naira redesign policy that was introduced. Many SMEs had to shut down due to the peculiarities of business operations in relation to cash-flow.
The Nigerian Association of Small and Medium Enterprises South-West region Vice-President, Solomon Aderoju, told The PUNCH that SMEs have been prone to shocks from inflation, interest rate and other factors.
He says, “The monetary policy rate does not favour us. That means nobody can borrow less than 16.5 per cent and no SME can thrive with such.
“Also, infrastructure has to be in place to address the issue of energy. We have to look into that because the cost of production is very high.”
Regardless of these internal and external factors that forced the hands of many entrepreneurs to cut down on quality to increase profit, operators are of the opinion that applying effective strategies can help save the future of African owned businesses and protect profit.
The world is built with competition in place. So for every market solution created, there are other people working tirelessly to create an improved version of whatever product you are offering. One way to stay ahead of the curve and improve profit margin is to conduct market research.
This way, your every business decision is founded on data and current insights about your market.
The Chief Economist and Head Research/Intelligence at Coronation Bank, Chinwe Egwim, says, “Market research is of course gathering consumer feedback on your product or service and collecting pertinent information on the marketplace.”
Egwim explains during a virtual master class organised by the Lagos State Trust Fund that there is a need for businesses to take this seriously.
She says, “It is very important and this requires research on competition and our competitive analysis. Like general pricing by your competition, you should have a sense of what that looks like.
Conducting market research would assist with identifying your target market and their motivation to purchase your product or service.”
She explains that this will help business owners understand market size, income ranges and “help expand your business to new markets.”
You should ensure that you are making more than your current spend as an entrepreneur to stay at the helm of business profitability. With the inflation, this may mean cutting back on some expenses to maintain a healthy profitable margin but not necessarily reducing quality.
“There should be a keen focus on cost cutting or minimising unnecessary costs, as this can save your business some money, especially if you are unable to increase the prices of your products or services, which by the way, lots of SMEs are struggling to do,” Egwim says.
One way to spot unnecessary costs is by discovering “what adds value to your goal, to your goods and services and then have to apply fiscal discipline by creating and sticking to budgets; it is imperative that you do that.”
Egwim reasons that in the bid to reduce cost, “for example, the adoption of a sachet marketing which cushions the effect of rising prices on customers by making products in reduced quantity but more affordable can be explore. So we have actually seen this trend spike at least since 2020.”
Even big brands, such as Peak and Coca Cola have adopted these approaches after feeling the pulse of the customers and observing the financial temperature of the country.
The Media Manager, West Africa, Mondelez International, Bolu Essie, also adds, “If you are selling a product or you own a business, you want to know the people you want to sell to and where you can find your customers. You need to know if your customers are on Instagram or LinkedIn or Facebook; these are what research does for you.”
Essien speaks during a panel session at the Halisi Business Seminar, themed ‘Building resilience in uncertain times: Growth strategies for 2023, the importance of social listening’.
He says since business owners are not “the only one offering this service, there are others and customers could be either happy or not. Social listening makes it easy for you to know what they are complaining about.”
The world’s rapid conformity to technology has given birth to a digital era which has changed the business landscape. It is important that SMEs utilise technology tools to improve profit, especially with the growth of e-commerce in Africa.
Giving the advice for MSMEs to embrace digital change, the National Information Technology Development Agency urges SMEs to adopt and adapt to digital technologies if they are to survive in the 21st century.
According to the agency, the adoption of digital technologies boost the productivity and profitability of businesses.
The Director-General, NITDA, Kashifu Inuwa, while delivering his keynote speech at the 10th edition of Abuja Enterprise Agency’s Business 360 Clinics themed, ‘Technology utilisation and innovation: Its effect on sme profitability and productivity’, he says, “Technology utilisation exerts a significant impact on the economic survival of nations.”
Big players like Jumia, Konga and other businesses have leveraged online marketing to drive sales, improve profit and deepen connection with customers through various programmes.
More than ever, as a business owner, you must take matters into your hands to ensure maximum profit and improve your chances of business success, by plugging into the tips shared by operators and economists in the SME industry on the best practices for sustainable progress amidst the inflation.