How To Manage Your SME In The Wake Of The OPR Hike

As of July 2023, Bank Negara Malaysia maintained its benchmark interest rate¹ at three per cent after raising it by 25 basis points in May earlier this year, citing that the monetary policy stance is slightly accommodative and remains supportive of the economy. While economists are certain that the 3% rate is not expected to affect the nation’s economy², the frequency of rate fluctuations has undoubtedly increased the rate of borrowing, and subsequently the overall cost of living for Malaysians.

Thus it is unsurprising that small to medium businesses in the country may be feeling the pinch as the price of goods has risen, with an inflation rate of up to 3.3%³ in 2022, according to the Department of Statistics Malaysia (DOSM). With the rising costs of goods and operations, SMEs are affected as consumers may feel they have less purchasing power, affecting the overall sales of businesses nationwide.

If you’re an SME owner, you need not fear the next Bank Negara announcement! Read on for some tips on how your SME can get through the next OPR hike:

¹ Bank Negara keeps OPR at 3 per cent (NST, 2023)
https://www.nst.com.my/business/2023/07/927973/bank-negara-keeps-opr-3-cent%C2%A0

² Bank Negara’s OPR hike not expected to affect Malaysia’s economy, says economists (NST, 2023)
https://www.nst.com.my/business/2023/05/905335/bank-negaras-opr-hike-not-expected-affect-malaysias-eco nomy-say-economists

³ Stats Dept: Malaysia’s inflation rate rose up to 3.3pc last year (NST, 2023)
https://www.nst.com.my/news/nation/2023/05/910464/stats-dept-malaysias-inflation-rate-rose-33pc-last-year

1. Managing Operational Costs

Increasing cash flow without overloading your current employees or sacrificing product or service quality can be a challenge, so it is important to streamline your expenses by implementing cost-cutting measures to yield immediate savings. Some of the measures you can take as a business owner include outsourcing certain tasks or considering new vendors. Another measure that you can take, especially in this digital age, is to digitalise your physical processes. By automating repetitive tasks such as payroll or running marketing promotions, you can save hours of manual effort every day, freeing employees to put their time toward business productivity.

2. Explore New Revenue Streams

All businesses need revenue to sustain their operations. However, in these uncertain times, a single revenue stream may be seen as unreliable, risky, and vulnerable. Having multiple streams of revenue can help protect your business and make it more resilient.

One way to explore new revenue streams is to consider diversifying your product offerings to your customers. You can entice new customers by bundling new products with existing products under different packages at different price points, with a pricing strategy that helps you maintain a competitive edge.

Another way you can explore new revenue streams is to offer recurring subscriptions. For instance, you could provide a membership option to loyal customers in return for their continued loyalty to your brand on a monthly or annual basis.

3. Diversify Your Customer Base

While it is always good to retain loyal clients, small business owners can become overly reliant on their current clientele, ignoring the task of attracting new customers. If losing a single large customer could put your livelihood at risk, then don’t put all your eggs in one basket! It is time to establish fresh income opportunities by attracting new customers.

Consider exploring a different segment of your current customer base by selling your products and services to clients in various niches, sectors or geographical regions that are outside your existing territory. A great way to do this is to offer your products or services online, where a wide range of customers can be found. By selling your products or services online, you’ll also have the added benefit of utilising analytic tools to discover potential customer segments that you can target in future marketing campaigns, thus increasing your overall sales.

4. Employ New Pricing Strategies

Evaluating your prices on a regular basis can help future-proof your business against competitors and the state of the economy. It is generally recommended to run a pricing analysis every year or two to evaluate your pricing against competitors, and consumer expectations.

You can utilise a competitor-based pricing strategy as a way to determine the prices for your offerings. As a business owner, you can decide between these two main choices when you see the price difference for the same product or service:

• Beat your competitors’ price - If a competitor is charging more for the same offering as your brand, then make the price more affordable.
• Beat your competitors’ value - Also known as value-based pricing, you can potentially price your offering higher than your competitors if the value provided to the customer is greater.

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Growing and expanding any business is a challenging endeavour. It is important to consider all possible avenues to keep your business afloat amidst these trying times.

Explore endless opportunities for your business with UOB BizMoney – a financing solution that provides additional working capital for SMEs up to RM1,000,000. Provide your business with the financial flexibility you need with a flexible repayment tenure period of up to 60 months. The loan is collateral free and can be approved in just 5 working days¹.

Thanks to UOB BizMoney’s flat interest rate throughout the loan tenure, business owners can rest assured with the financial predictability they’ll need to effectively forecast future expenses. This is to ensure that they will not be caught off guard by unexpected costs or fluctuations in interest rates. The stability empowers business owners to make well-informed decisions, seize opportunities, and grow their businesses with confidence.

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¹ Terms & Conditions Apply.