Retaining customers is SMEs top concern
Losing customer contracts is small firms’ main concern during the economic downturn, according to venture capital firm Spark Ventures.
Research from Spark Ventures found that 69% of small businesses said that customers delaying or cancelling contracts was their biggest worry — outstripping concerns about cashflow and access to finance.
Spark Ventures spokeswoman Wendy Svirakova said cancelled and delayed contracts are the biggest concern for small firms because they can lead to further problems, including lending difficulties and reduced cashflow. Spark Ventures chief executive officer Andrew Carruthers said:
“Cancelled contracts can have a dramatic effect on a firm’s cashflow, especially if long expected orders are cancelled. Banks are also less willing to lend to these businesses because they are unable to accurately assess their long–term financial stability.”
Andy Preston, head trainer at sales training firm Outstanding Results, said that firms must be prepared to renegotiate their contracts, and offer customers flexibility and value as an incentive to continue the agreement.
“People are holding off making purchasing decisions and are looking to trim their non–essential costs. They are also looking at existing contracts, and thinking how valuable they are based on the situation now.”
“Firms need to understand the situation of the businesses they supply, and try to be flexible, without giving stuff away. They should think about what extra value they can add, without cutting the price, and make sure the customer feels they are being given a fair deal.” he added
The survey also showed that 40% of small–business owners intend to scale down their sales and marketing activities in the year ahead. Preston continued:
“Businesses need to be prudent in the current market, but cutting down sales and marketing activity is business suicide. Existing customers are looking around now and you have to bring in new customers through marketing.”