Graham Carn’s 10 step survival plan for your business
The beginning of the year is the usual time to dust off the business plan (if you have one!), review how well your aspirations for the previous year worked out, and think of what lies ahead for another year.
For those of you who have put off your 2013 analysis and are perhaps still feeling that business life continues to be very difficult, Graham Carn, Financial Editor for SBT sets out ten key survival tips for SME business in 2014 with a view to achieving growth.
1. The vital importance of cashflow
Do you have a firm handle on the flows of cash in your business? Do you know more of less exactly what balances there are in your bank account, or where you are against an agreed overdraft facility? Are you invoicing promptly and chasing overdue accounts? With late payers what is going to be your policy: you can impose late payment charges, but need to consider also the impact on the relationship – you might need to approach different customers in different ways but taking prompt action is always best: the personal phone call before the letter? Are your stock levels healthy in terms of being adequate for anticipated sales activity and without significant ‘dead’ stock? Are you happy with your credit terms? With suppliers can you negotiate for longer settlement and with customers can you negotiate shorter? If you anticipate any tight cash flow periods coming up make sure you let your bank know!
2. Mind your overheads
How recently have you reviewed your outgoings? It is easy to be complacent and assume you are running a tight ship. Review every part of your business regularly. Challenge your own behaviours and those of your staff, for example are all business journeys necessary, can telephone calls not just save money but also free up time for more productive use? Energy is an increasingly big cost these days so within the office, or the business premises is equipment being turned off at night, are heaters on full blast and windows or doors open? The little things all add up and those not paying the bills may not be thinking considerately. Energy savings will also help the planet! Is there a way to negotiate new terms and conditions with your suppliers – as a regular customer, can you ask for a reduction in price, particularly where keeping your business is valued?
3. Consider how safe your new customers are
Bad debts can very easily trigger cash flow crisis, particularly where you have to buy in product or pay wages to provide a service. Ensure you take appropriate credit checks and if you are not 100% happy you can explain why and ask for a percentage of the invoice up front or in stages. Ensure also with new clients that any credit terms you do give are clearly communicated and understood. Be careful not to be tempted by a significant new order – if it went wrong it could put your business at risk, so not too many eggs in one basket. If you are uneasy, remove the worry by using credit reference agencies and insuring against default: a price is attached, but perhaps worth paying for peace of mind!
4. Retention of existing customers
Many businesses can find themselves focussing hard on new customers and forgetting their existing ones. Having attracted a customer in the first place you don’t want to lose them – it is easier to keep than to find new. Don’t let service levels or pricing complacency let you down – consider discounts for increased orders, ensure good communication, and above all make your existing customers feel valued – or someone else will poach them away! Consider supporting local initiatives and becoming more environmentally friendly… these measures need not be expensive and could help to set you apart from your competition.
5. Customer service
When times are tight financially price is very much in focus, but do not underestimate the impact of good service. There will be those that always want the cheapest product or service but there are many more, I would suggest that want consistent and reliable service. The value of good service – being kept well informed, being reliably treated – should not be underestimated. It is the obvious way to differentiate yourself from your competitors unless you are in a completely niche situation. Your customers will reward you with further business if you provide product at a competitive price and deliver it in a friendly and efficient manner.
With budgets tighter, marketing has to be accurately targeted. Consider carefully where your business comes from and target your funds accordingly: the rifle shot versus the grenade approach! You will want to get your message out there but be thoughtful as to how you distribute your marketing spend. Don’t be afraid to try new things – telemarketing, radio, even TV if the budget is sufficient! Also monitor and analyse the success of initiatives, establish from new customers how they heard of you so that you can decide what initiatives have worked well.
7. Get online
This could have been included in the marketing section but really it needs to be a tip on its own! Websites are the shop window of the day and online sales and marketing can open up significant new marketplaces for relatively small cost. Social media too has proven to be effective for some businesses and although both websites and social media need resource to stay updated and monitored, it is something that needs careful consideration. If it suits your business make sure you resource the online selling properly, including providing secure payment methods and being able to service increased volumes in a timely manner.
8. What product will sell best?
Take care not to diversify too boldly and spend significant time effort and money on trying to sell new or untested products and services in an effort to create more ‘turnover’. Turnover of course is just a figure: it is profitability that is the more important number. There are often benefits in looking to widen your appeal but there is also more safety in sticking to those products that you have a track record with and have served you well in the past – where you know you can achieve an acceptable margin. Be careful also about a SALE as a seasonal habit. It’s fine to dispose of out of date stock but be careful not to just be selling your stock cheaply and miss out on wider profit margins, by just being a little more patient.
9. Staff and training
If you have had to let staff go and now everyone is having to work harder to do get all the work done, then in some ways this is very positive and you have most likely improved efficiency. However, staff are clearly very important to a business and extremely valuable assets. Aside from you they are the next important day-to-day face, or voice, of the business and are vital to retaining customers and keeping your business running. Despite being busy training is important to their personal development, their productivity and their positive morale. It is important to keep training plans active.
10. Lastly, take time to think about your business – helicoptering!
Running a business is a hugely mind absorbing job. It is easy, very easy, to get consumed by the weekly requirements of who you need to see: resolving problems: juggling all sorts of business related activities. Amongst these ten tips there is no more important task than to take time out to think about your business. I call it helicoptering. Rise above the daily routine, take specific time to look down at your business (you know it as well as anyone) and think hard about the business. Think strategically, think radically, and definitely give yourself the space to think clearly. There may be opportunities you are missing because you are not giving yourself the time to see them, and there may be decisions you are making that may prove to be wrong because you hadn’t thought them through sufficiently. Think about premises – bigger or smaller, subletting, buying, renting. Think about staffing – the right people in the right places, different working patterns, making efficiencies. Think about product, competitors, other threats and your strengths. If you have read these tips there may have been some things that have struck a chord in how you operate your business – perhaps something that you have been meaning to do and put off? An eleventh tip would be to make a note of them now, and then follow them through with action when you are next at your desk! Graham Carn, SBT Financial Editor. Graham is also the senior partner of Blackstones Consulting – if you have any comments or questions on this article please email: email@example.com