As a small business owner, you will be faced with difficult choices during this ongoing economic downturn that is causing a decrease in demand for your product or service. In order to remain competitive, you must rationalise operations and offer innovative responses to external threats.
It is critical to encourage innovation and make the changes that are necessary to ensure that your business succeeds now and in the future.
It’s often said that most small businesses fail within five years. And, hats off to them – at least they tried. Furthermore, nine out of 10 small businesses never grow beyond the owner-operator stage to the next level – the level at which the owner can hand the business over to others to manage.
Some people will say that failure begins with a dearth of good marketing. And that could be somewhat true.
However, it really begins with a concept of the function your business makes in your life. For several, their retail store, accounting, legal practice or career is merely a way of earning a living. For others, their business embodies an asset to grow, an inheritance to be transferred to another generation of family members, or, put differently, something of enduring worth – worth that can subsist past the day they choose to retire or move on.
If you want to elevate your firm to the next stage, there are, in fact, a few prescriptive lessons that you can’t overlook. Here are the top seven New Year resolutions for small businesses to implement to succeed in 2013 and beyond.
1) Manage your cash flow
Cash flow is critical when it comes to handling the finances of a small business as research shows that approximately 80 per cent of small business failures stem from poor cash flow.
Good cash flow management means deferring the outflow of cash for as long as practical while assuring that your debtors pay you as soon as possible.
It is essential for SMEs to produce periodic cash flow projections, whether it is annual, quarterly or monthly. A thorough forecast model will allow you to foresee difficulties and be equipped if and when financial problems occur. It can also be used to produce forecasts for sales, costs, credit and funding. The following are a range of steps to help SMEs efficiently manage their cash situation:
- Prepare a sales forecast
- Estimate cash inflows
- Estimate cash outflows
- Calculate your net cash position
- Surviving shortfalls
Good cash flow management can frequently be the defining feature between a successful business and a failed one. In any business endeavour, cash is king, hence it is key to appreciate your cash cycle and effectively manage cash entering and cash exiting throughout any given phase.
A major reason why small businesses fail is inadequate marketing. Your company may have a great product or service, but you don’t know how to inform potential customers who would benefit from your product or service why they should consider you.
In the current dismal economic climate where change and innovation occur daily, the major test is maintaining your business reputation. This is where marketing plays a key role in your business development. Not only do SMEs have to manage traditional marketing channels, they also have to learn how to manage, adapt and grow their business online. SMEs need to “rev up” their marketing so that it is producing maximum results, which could mean a difference of thousands of dollars of revenue.
Developing a comprehensive marketing plan is the initial step to avoiding becoming one of the failure statistics.
A good marketing plan sets clear, realistic and measurable goals, includes deadlines, provides a budget and assigns responsibilities. A plan can consist of these elements:
- Analysis of your current market
- Key strategies
- Steps to achieving your business objectives
- Proposed budget
Marketing may not be the panacea, but very little is going to occur in your business until you fashion and follow a business development plan. It is said that 60 per cent to 70 per cent of your marketing budget should be focused on the people who already know you. Every month that you fail to connect with your customers – “reach” them in some manner – their predisposition to do business with you declines by 10 per cent.
So develop a marketing plan and/or if you already have one, monitor it on a regular basis. Remember that your marketing plan should be a continuing process during the different phases of your business.
3) Manage your operations – implement systems
Does your company run as smoothly as you’d like? There are steps you can take to increase productivity, improve quality, and effectively manage the day-to-day functions of your business. In any business, you must automate and augment every potential part. Use technology to its maximum.
The costs of technology that were previously the domain of large enterprises is now economically available to SMEs hence, there’s no reason not to take advantage of the situation. And with the advent of the cloud together with software-as-a service your business can now afford to leverage new technology to effectively compete with large enterprises.
Resolve to lighten your load – assign recurring tasks straightaway. Handle only what only you can do and use technology to produce a sustainable competitive advantage for your SME.
4) Test or track your sales and marketing efforts.
Nowadays, what you don’t know could definitely damage you. As a business owner you should know: What you can measure, you can improve. There are various metrics in your business operations besides the usual financial ratios that you should periodically monitor and assess how to optimise the processes that produce them.
You should also determine how your business measures up to others that are similar to yours via benchmarks. Benchmarking allows you to evaluate your performance and ensure that your business is operating at an optimum level. Resolve to develop and establish key performance indicators for your business and use technology to monitor, report and improve upon them. By doing this you can attain your objectives and successfully grow your business.
5) Follow up with prospects and clients
Everyone gets busy. But in many businesses, the average sale occurs after the fifth attempt. Successful SMEs have an established system that automates the process to ensure they’re following up with prospects regularly. If you’re not using a customer relationship management system, like Act!, Salesforce.com or even MS Outlook, a few of the market leaders, you can’t say you’re serious about business.
And for that, there’s no defence. After all, you’re offering or providing a service or product. After all the time and effort you’ve put into building your business, just focus on the business side of things and you’ll realise the benefits.
6) Implement a robust business continuity programme
According to a survey by Zurich North America, business interruption was identified by more than half of survey respondents as the top risk of 2012. Several respondents indicated that natural catastrophes, such as Hurricane Sandy, had heightened recent awareness of first-party and third-party risks to business resiliency.
And a joint Zurich and Business Continuity Institute survey released in November indicated that supply chain disruption was selected as the top customer blind spot of 2012. Seventy-three per cent of organisations recorded at least one disruption in 2012; furthermore, the majority of interruptions were not physical in nature or caused by typical named perils.
Hurricane Sandy’s devastation was a terrifying reminder to CIOs and senior IT leaders everywhere how vital it is to have a disaster recovery and business continuity plan in place. The hurricane and other recent disasters bared gaps and weaknesses in many businesses’ crisis management plans.
While many companies have good crisis management plans that will help them survive the initial effects of a major event, today’s organisations need an all-inclusive business continuity management programme to carry them past the first 48 hours. A well-planned programme will carry a company through the crisis and its aftershocks to the restitution of operations and the protection of the company marque.
Supply chain and business continuity issues should become more of a focus for your SME, and particularly so, as the BCI reports many companies never recover from a prolonged disruption. Hence, the importance of a comprehensive business continuity management programme cannot be overlooked. Given the risk to profits, market share and reputation, SMEs should discuss these critical topics at the table when planning their supplier coverages, and potential gaps, with stakeholders.
Your company is one of your greatest investments. Protecting yourself from potential downsides is vital to your success. Therefore, resolve to develop and implement a robust BCP this year, or if you already have one, audit and update it – remember it is not a static document.
7) Develop and retain the right talent
Recruitment, training and development of talent are essential to the achievements of a business. Perhaps the most positive benefit is better employees. When a company seeks to develop the potential of an employee, it should encourage improvement via training. Very often, good training is just as important as a good benefits package for an employee.
Developing employee skills is not only about enhancing their specific field-related skills, but also improving their soft skills i.e. their interpersonal and communication capabilities too. These abilities are constantly evolving and are perhaps more important than field-related abilities. An employee can be average in their field skills, but an excellent communicator with fantastic people skills is an asset to your business.
These kinds of employees tend to be a better fit with a company so employ them whenever you can. Other skills that should be highlighted besides those related to industry and interpersonal skills include effective time management, dispute resolution, and how to build strong teams.
Then there is your management team to consider. Effective management and leadership far exceed the technical aspects of the position and there are some key skills that will determine a strong leader. If you or your team lacks the essential skills to manage your business, then you need to ensure that those skills are acquired.
Undoubtedly, leadership training is critical for business survival and ongoing success, Irrespective of the size or structure of your business, staff leaders, managers and other supervisors will determine the ambiance and performance of your company. This is one of the fundamental reasons why more businesses and corporations are using professional workshops and seminars to teach their managers proper leadership skills.
When a business uses a professional agency for training their supervisory and leadership staff they are basically guaranteeing greater productivity of their company. There are some key and fundamental skills that are taught at these workshops e.g. effective communication.
Other important leadership skills are based on creating a team atmosphere, delegation and conflict management. There is a proper and effective way to deal with insubordinate behaviour and strong leadership skills will help to correct problems and build a more productive staff.
And don’t forget to create a positive work environment that complies with your legal and corporate social responsibilities. Here are a few pointers that will assist you with this:
- Create a workplace that is free from discrimination and harassment.
- Keep records on everything from staff salaries to their job skills as this can help you administer your payroll and plan training.
- Measure your employees’ performance on the job, to help them understand what is expected of them and to deal with performance problems as quickly as possible.
- Set a clear sense of direction and leadership. Management should be “walking the talk” and setting a positive example for employees to follow.
This year, resolve to conduct a detailed skills gap analysis and ask your current employees what works most effectively. Determine what resources would help your employees improve as appropriate questions provide very useful answers. Employees will improve job performance dramatically and you and your company will too.
The core of any business begins by setting goals and efficaciously managing the cycles of daily operations. The foregoing resolutions will help you structure your business, manage your operations and avoid risks. Incorporating and following them in managing your business will help your enterprise succeed.
For more information
Gregg Anderson, MBA, CMC
MD, VisionQuest Management Services Ltd