Think smart, stay lean
Strategise how to survive before you can thrive
Low oil prices and widening fiscal deficits have created a subdued outlook for companies in the region.
Though the UAE isn’t as badly affected as some of its neighbours, downsizing, relocating and outsourcing are everyday realities for businesses operating in tough times. Unlike the financial crisis of 2008 — when unprepared firms were forced to shed staff or shut down — company owners this time around are putting previously learnt lessons to use.
Cost-cutting is on every mind, and small businesses making an exodus from expensive free zones for cheaper offerings elsewhere is one example. “I can afford to pay Dh44,000 for a small desk and two visas, but I think it is unwise and impractical this year,” says S.A. Ahmad, who is unhappy with a recent fee increase at the Dubai free zone where he has been licensed for ten years. “We are a two-person business providing photography and videography services and just as our clients cut down on spending, we found ourselves burdened with a huge increase in our annual fee.
“Free zones in Ajman, Fujairah and Ras Al Khaimah offer similar licences for half the cost, and we are in the process of relocating. An annual saving of Dh22,000 may be paltry for a corporation, but it makes a huge difference to a small business and we will use it to invest in new equipment.”
Dr Sharad Nair, Founder of Apex Advisors DMCC, advises companies on mergers, acquisitions and expansions into emerging markets, and his client base now includes many local firms in poor corporate health. “It’s a sign of the times that our turnover for 2016 exceeded $10 million [Dh36.7 million], and 50 per cent of this came from services rendered to distressed companies in the UAE,” he says. “Some industries, such as advertising, media [and] general trading, are more affected than others. Most crises stem from a steep increase in the credit cycle.”
One problem in the UAE is the focus on big business; people don’t seem to notice smaller firms willing to provide the same product or service quality at lower costs, he explains. “During lean times, expand your customer base and include smaller clients to average it out. If you are top-heavy, be more creative. If you have multiple teams doing identical tasks, identify the most efficient and use them as examples.
“When a troubled company approaches us, they expect overnight recovery, which is impossible. Raising debt takes a minimum of six months, while raising equity could run up to nine months. If your company is showing signs of distress, do get professional help, but don’t wait until the last minute.”
Some company owners are chanting their own corporate mantras to stave off the headwinds. An architect by learning and an owners association manager by training, Ranju Paul ventured into business in 2010 just as the effects of the financial crash were being felt.
“It was a tough market and my options could have been limited, but I used the diversification strategy to stay afloat. Capitalising on my strengths, I branched out into interior design and specialist consulting in building management.”
Now, the director of Silhouette Design and Silhouette Star Decoration can’t stress enough on research and diversification.
“Whether you are setting up a new business or expanding operations in this grey financial climate, do your feasibility, study the market and identify niches where you can excel. Be ready to adapt to changing needs and move with the times.”