I believe these stats are a little misleading and we will see the full horror story over the next 6 months. The businesses that are now closing are not your small family businesses, but ones that were established.
This week work wise has been nothing to write home about as there has been loads of downtime due to no electricity. At the office we have been cut off every day since Tuesday at 10am with power coming back by around 1pm. This is fine for warehouse staff, but the admin side of things just goes down.
We are based in an industrial area so that is for everyone unless you have generators which we don't. The ones we need will cost in excess of $7500 and we are currently looking into it. The lucky part for us so far is my factory in Natal has only felt the cut offs during the evening and we do most of what is required during the daytime. Orders are not sufficient to run 24 hours so we are making things just tick over. We need a much bigger generator if required and will purchase one if things don't improve. Fortunately this goes down as a business expense so the tax man will be paying for it.
I have mentioned this before how bad the economy really is and what is more noticeable is the amount of people standing on certain street corners hoping for a casual labor job for the day. We used to have two or three street corners where we knew we could find casual workers when required, but those corners are all over now. Very sad to see as these people want to work, but there is very little available.
Unlike the rest if the world who seem to be picking and choosing what they want to do work wise there are no choices here as you take what you can get. What has been sad to see is some of my old school colleagues struggling begging for money on social media as they are not coping.
I honestly believe we are in the midst of a major recession as there is just no spare money around and the ones that have it are few and far between. I count myself as fortunate compared to many as have had the luxury of taking time with my business not having to worry about taking a pay check. Cash flow is the biggest killer of any business and why we took this stance 17 months ago.
We are currently waiting on a new contract that will alleviate the pressure and get us back to a comfort zone of having the factory run at 60% capacity. This is great compared to competitor stories who are turning on their machines every other day to run stock.
I have no sympathy for them as they are obviously having to raise their prices to cover their expenses as they are manufacturing less than half they were 2 years ago. I have seen the fish bowl effect with a few businesses in the past where the same profit is still expected even though you have less fish in the bowl. This always ends badly as you end up with no fish. I was hoping to see if we could overlap with another factory that is close by but we are nowhere near on the price points and is a non starter. The idea was we could supply their customers in Natal which is over 500Km away and they could supply for ours up here saving us both on transport costs, but they are just way too expensive.
I questioned my business partner today as the thought crossed my mind that we were just way too cheap but we are running at the same margins as before and therefore no need to change. We are thinking that many of our competitors are pricing themselves out of the market now and we need to do a marketing push to gain more market share. These are interesting and weird times indeed and kind of curious to see how this all plays out.
What is evidently clear is many businesses are not going to be around to see Christmas and are already on their way out. Once you raise the prices too high you are no longer competitive and your customer base will just slowly shrink away.
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