Maintaining profitability in an increasingly competitive market is becoming more and challenging. Follows are six of the most common issues faced by small businesses, and what you might do to mitigate their impacts.
One – Cashflow is vital to ensure you can pay all your staff and suppliers on time. This includes making sure you have forecasted all your tax commitments and you have allowed sufficient funds to meet those requirements as they fall due. Cashflow management also includes chasing up reluctant debtors. To encourage timely payments consider offering incentives for early payment. Negotiate a payment schedule (which may include an administration fee), which not only ensures full payment is eventually made, but also helps your debtors own cashflow management which could be an attractive option for them.
Two – Identifying and retaining profitable clients is the objective of every business. It requires developing and marketing your unique selling proposition to current and potential clients. Analysing the characteristics of your most loyal clients, including their purchase patterns will enable you to fine-tune your marketing and promotion activities to ensure you maximise your reach to future clients. Provide an opportunity to receive feedback from your clients, use social media where appropriate and ensure you remain current with the specific communication media your clients typically frequent.
Three – Overhead expenses may start to increase to the point where the resultant reduction in profitability begins to put your business under considerable pressure. Keep a tight rein on all expenses, which will require you to regularly review all your financial metrics. Be ruthless to cull redundant stock or unprofitable services. Ensure your products and services are not unnecessarily complex or feature heavy; the idea is to add value (for the client) not increased cost (for you as supplier). Regularly review supplier arrangements (including any borrowings) to ensure you have the best negotiated rates – especially if the business operating environment has changed.
Four – Motivating staff is important to ensure they remain productive and engaged with the vision you have for your business. The costs of staff turnover can be high as much time is required for retraining and there will be reduced productivity during their training period. Regularly review your organisational structure to ensure you have the right roles matched with the right skills; also consider your own role may require change as your business evolves. Rewarding staff appropriately and giving consideration to adequate succession planning will ensure you have future-proofed your business should an unforeseen event occur.
Five – Staying current with your sector, including technological trends is vital to ensure your products and services remain relevant to existing and future clients. Improvements in technology can enable you to streamline both the production and delivery of your products and services. Research what your competitors are doing, and seek to regularly benchmark your business against industry leaders. Identify appropriate industry and business networks, attend conferences and trade fairs to enable exposure to new ideas; as well as to potential future partners, clients and/or suppliers. Consider your own professional development requirements and invest appropriately.
Six – Self-Care is important to ensure that you aren’t working longer and longer hours just to get the basics done. Delegation, automation and scheduling time-out of the business are all vital activities to ensure you continue to make quality decisions, especially under pressure.
Finally, consider including a Business Coach or Mentor on your team to provide you with an independent viewpoint, guidance and support.
If you want some help to talk through your business issues, then give me a call!