The Centre for Economics and Business Research (Cebr) expects the UK economy to grow by 2.5% this year, but see this slow to 2% in 2016 and then just 1.7% over the years 2017 to 2020. Managing a small business in the current economic environment can be challenging, here are some tips to improve your business and ensure it stays on track.
1. Plan & Measure Performance
Set expectations for your business over the next year in a budget and track financial and non-financial metrics to ensure you keep control of all business functions. Ensure all employees know what the targets are and understand the importance of their role in achieving it.
Review performance against budget monthly and update your current expectations in a forecast. Perform monthly Strengths, Weaknesses, Opportunities and Threats (SWOT) analysis and start an action plan to capitalise on your strengths and opportunities and reduce your risks and weaknesses.
2. Control & Plan Cash-flow
Ensuring working capital is as high as possible should be a priority for all businesses.
Ensure you perform at least weekly bank reconciliation and cash flow forecast to ensure you understand all of your current and expected costs.
Produce and review weekly an aged debtors report and ensure you are actively pursuing all outstanding debts.
Change your payment terms where possible to ensure the cash is deposited into your account as quickly as possible, offer a discount as an incentive or consider using a factoring company.
All new customers should be credit checked.
3. Reduce costs
In uncertain economic conditions, it is essential for businesses to continually review their cost base and try to reduce costs where possible.
Staffing and building costs are usually the largest, but it can take a long time find cost savings. To make immediate savings analyse temporary staff, travel, utilities, marketing, telephony and technology costs.
Review all contracted costs, such as insurance and shop around for the best deals.
4. Improve efficiency (Get more from less)
To remain as competitive and cost efficient as possible continually review processes and practice. Try to reduce waste from processes by identifying what your customers find valuable. Remove steps in your processes that do not deliver value.
5. Seek new markets & channels to grow
Trying to increase revenue is essential for business sustainability. Due to a lack of funding, many small businesses fail to execute growth plans. Improving cash flow forecasting and reducing costs can allow businesses to undertake their growth plans without seeking outside funding.
Growing your business doesn’t need to be expensive, growth can be achieved by improving marketing campaigns or sales win percentage. It is important to analyse what your business can do better to grow.
Find out what your existing customers like about your products/services and develop new products from existing products based on customer feedback.
Try to find new markets for existing products/services. Research whether your product/service is needed by a different demographic, sector or region or country.
6. Retain Customer Loyalty
Existing customers spend more than new customers, and customer retention costs are much cheaper than new customer acquisition costs. Despite this, marketing budgets focus on new customer acquisition. Offer your existing customers incentives for their loyalty and/or recommending your business to others. Getting your customers to look and talk about your products is strategically just as important as traditional advertising.