Never sit back and admire what you’ve achieved – always look forward to what’s next. Innovation is progress and progress leads to further success, so don’t put a lid on your ideas and goals – however successful your current business. Continually evolve your offering, responding to clients’ needs and aspirations to keep clear water between you and your competitors. Regularly step back to view your business from your customers’ perspective and always seek to exceed their expectations.
In the early days, cashflow was a major issue for us and we felt like we were hitting brick walls, one after the other, in our search for a bank to allow us BACS and direct debit capabilities. We knew we needed them for the development and scalability of the business and were determined not to give up. We finally found a bank to say ‘yes’ when all the advice around us urged caution. If you believe in something and know it’s right for you – stick to your guns.
Any business is only as good as the people in it, so you need to get your recruitment right. Recruit on attitude not qualifications on a piece of paper; have fun together; introduce a strong culture of reward and recognition; and – importantly – pay more to attract the very best.
When we started out in 2000, a time when outsourcing was seen as the preserve of larger businesses, we were considered to be bucking the trend by providing our service almost exclusively to start-ups and small firms. At that time, for larger businesses to even think about outsourcing their telephone answering function was virtually unheard of, so we faced many sceptics.
Listen to your clients, communicate well and think about what you need to do to reach new markets. Pre-empt. Don’t be afraid to be different. Stand out, so that it’s easier for prospects to make a choice. Get your name out there; get people talking about you and build fantastic relationships. Don’t just concentrate on new acquisitions; look after the ones you already have, too.
The excuses for not buying now are many: too small, too big, too soon, too fast, too slow, too expensive, too complicated. But sometimes hesitancy to buy is not about the seller and the seller’s service, but the buyer’s internal thought processes.
More specifically, I am curious about why people don’t buy into a process that they know, in their heart of hearts, is one that they not only want, but also need for the development and growth of their business.
The need for what is called ‘strategic planning’ is recognised as being a cornerstone of developing, running and growing an organisation. There are plenty of trite quotes, such as, “failing to plan is planning to fail” and so on. However, at the core it is pretty much universally recognised that it is better to have a plan than no plan. And it is better to have considered the various options while being aware of the changing pressures in the business environment. I call it making your mistakes on paper.
Despite strategic business planning being almost like “motherhood and apple pie” (in other words, a good thing, something that is required), I’m still astounded at how so many people manage to delay or put off the process. This is madness, because a little bit of thinking and reflecting can help to direct and focus one’s actions on what is important and understand one’s priorities.
Copyright © Robert Craven 2014. Robert Craven is a keynote speaker and author of business bestseller Kick-Start Your Business. His latest book is Grow Your Service Firm.
He also runs The Directors’ Centre, helping growing businesses to grow.
A recent survey carried out by business software provider Exact suggests that more than a third of the UK’s 4.9m SMEs don't have a business plan and “they could be missing out on an extra 20% of profit as a result”.
Of the 34% of respondents who didn’t have a business plan, 68% said they didn't see the need for one, while 23% were "too busy" to prepare one, 8% “didn't have anyone to help them” and 5% “weren't comfortable with numbers”. Should we be surprised by these findings and are business plans as key as some start-up experts would have you believe?
In fact, some experts would tell you that start-up business plans aren’t worth the paper they’re written on. Last year, author Paul B Brown wrote a piece for Forbes.com called Why Business Plans Are A Waste Of Time. He’d come up with the idea for a new book that sought to offer insight from the original business plans of highly successful US entrepreneurs.
But there was a problem. As Brown explains: “Most of the business plans had nothing to do with what the businesses eventually became. People who said they were going to specialize in developing new computer hardware ended up in software, for example. In a surprisingly high number of cases, what was in the business plan ended up having very little to do with what the company ultimately became.”
After writing about entrepreneurs for more than 30 years, Brown believes that creating a “painfully detailed business plan really doesn’t make much sense. The first time you encounter something you didn’t expect, the plan goes out the window. Things never go exactly the way you anticipate.”
A few years ago, (“former banker, small-business investor and veteran entrepreneur”) Kate Lister wrote a piece for Entrepreneur.com called Myth of the Business Plan. She highlighted research from Babson College (“regarded as having one of the top entrepreneurship programs in the country”), which found “no statistical correlation between a startup's ultimate revenue or net income and the supposedly requisite written business plan”.
The study found that: “"Some of the heroes of today's would-be entrepreneurs, such as Steve Jobs, Bill Gates and Michael Dell, did not have business plans when they embarked on ventures that changed the world”.
Lister said she was “all for having a business plan in the verb sense. I'm just not a big believer in the noun form”. She continued: “Writing a formal business plan invites the paralysis of analysis. It distracts the entrepreneur from slaying dragons and thinking big thoughts. And it's largely a waste of time. The result usually is a long-winded missive that's out of date almost the moment the ink dries. Great business plans may earn you an A in business school, but in real life you only get A’s for achievement. So stop dotting your i’s and crossing your t's and go out there and slay something.”
Andy Fox is the founder of “award-winning independent car service and repair specialist” iAutoUK. Recently, he wrote an article for the Huffington Post called “Why You Don't Need a 40-Page Business Plan to Launch a Successful Company” (sic).
“I've never had a business plan,” he admits. “Despite this, in three years my company has reached a turnover of over £1m, with £100,000 annual profits. For your business to thrive you instead need a 'Success Plan'. This is an evolving strategy consisting of three elements. No 40-page business plan needed. In fact, you can write a Success Plan on one sheet of A4.
“Firstly, you must understand your market place and how your business is distinct from competitors. Secondly, the Success Plan must have 'Leader’s Objectives' and you must communicate them to your staff. The final element is to make sure you make money! You must have a system that provides you with daily earnings information, and which can monitor cash in the bank and in the pipeline.
“Such a Success Plan is a short, relevant, real-world document. I believe a Success Plan is more appropriate than a traditional business plan.” Dryly he adds: “Look at companies such as Comet, Blockbusters and Jessops. I'm sure their business plans didn't include going into administration! Had they had a Success Plan, perhaps their futures may have been different.”
At the beginning of the year, the government announced a 15-month, £30m small business growth scheme. Qualifying small businesses can register for up to £2,000 of funding support for:
Small businesses must match the government’s funding and those that are selected randomly must work with the Cabinet Office's Behavioural Insights Team, which has been tasked with finding out how the funding helps businesses that receive it.
To qualify the small businesses must:
The Prime Minister’s enterprise adviser, Lord Young, heads up the fund and principally it’s meant to help businesses conduct research before launching a new product or entering a new market.
All services must be bought from approved advisers (there are more than 3,160 of them) through Enterprise Nation. As of 6 March 2014, Enterprise Nation reported that more than 1,400 businesses had applied for funding, and 598 vouchers had been allocated, with a value of more than £1m. Here’s the breakdown of the types of strategic advice small businesses have invested in so far:
With the scheme due to run for 15 months, I’d advise small businesses to apply – but be aware that you have to pay fees upfront before reclaiming money from the government. Find out more about the scheme here.
As the recovery begins, it's a sobering thought that because they have become reconditioned by a common ‘batten-down-the-hatches’ approach to recession, few companies are likely to be engineered for growth. The repercussions could be fatal.
The danger is no longer 'boom and bust' - but ‘boom and rust’. Proactive organisations will grow, but more pedestrian businesses risk stumbling into terminal decline. There is the real possibility that if business owners/managers remain in a risk-averse mindset, they will preside over organisational paralysis that not only prevents growth, but also allows competitors to seize market share.
After five years of surviving it's an understandable response, but it leads to an uncomfortable truth – many UK businesses have forgotten how to grow.
So, as the 'green shoots' of recovery begin to take root, what should businesses be doing to reinvigorate themselves and create a platform for growth? Experience suggests that many will be doing the very thing they should most avoid – focus solely on profit.
The alternative approach will send chills down the spines of accountants the world over, no doubt, and it may appear to defy common business logic, but the best advice for business owners seeking growth through the upturn is don't just focus on profit.
There are tried-and-tested ways to keep your business small and stressful and the most common is to obsess about profit as the markets recover and hold on too tightly to the P&L. This approach will prevent you from creating the headspace required to innovate and grow. You may well stay profitable, but you'll also stay small.
In the longer-term, the most successful businesses will facilitate a fundamental shift from a focus on profit to a focus on 'multiple'. They'll look at the long-term value of their business and switch attention from the P&L to the balance sheet. And crucially, they'll shift their focus from income to assets. After all, income follows assets.
As well as traditional 'balance sheet' assets, there are ‘intangible assets’. And the key to long-term growth - and driving the value and multiple in a business - is to focus on the intangibles.
Intangible assets generally boil down to culture, talent and systems. They're the people and processes that drive equity value and combine to form your intellectual property. The challenge is to structure your business culturally and organisationally so that it drives value, grows sustainable revenue streams and supports your long-term ambitions. Creating and building upon the right cultural platform to empower staff to deliver these common objectives - leaving senior management free to plan for tomorrow - is critical.
The economic upturn should present a clear catalyst for growth - but business owners must not allow their desire for short-term profit to dictate caution about long-term planning and investment. Now is not the time for 'logical' product innovation and extension based on understanding today's marketplace – taking baby steps will only keep you small. Today's green shoots represent the ‘teenage years’ - and to exploit them, businesses need bold innovations if they are to capture whole new markets and appetites.
To progress, owners should consider pursuing an asset-based strategy. The challenge is to understand the ‘rocket juice’ in your business – the core intellectual property that powers your current product and channel. Once you identify it, you'll be well placed to innovate into radical new product areas and channels that are more lucrative and less competitive.
The most successful companies at this point in the economic cycle will always be outwardly-focused - and they will look for partners that can help stretch and stimulate their thinking. Business coaching can provide an independent perspective on how companies can invigorate their core intangible assets to drive value, increase their multiple and stimulate sustainable growth.
The most common way to keep your business small and stressful is to focus obsessively on profit. But there are also innovative ways to engineer growth and the best is to concentrate on intangible assets, and to work with a partner that can help to revitalise your company and create new platforms for growth. After years of austerity, UK businesses may well have forgotten how to grow, but they need to get their memory back - and quick.
Blog supplied by John Rosling, CEO of business growth consultancy Shirlaws (UK) Ltd.
As the financial crisis of 2008 fades into the past, UK entrepreneurs are picking themselves up and dusting themselves off in increasing numbers. Against the odds, there were nearly 500,000 new businesses launched in 2012 and figures for 2013 are looking even better. So far, upwards of 350,000 start-ups have launched — a signal that we’re moving out of the winter of financial disaster and into a spring of new opportunity.
With this surge in entrepreneurship, naturally some small-business owners will succeed while others fail. The question, then, is how can you develop a business model that is poised for both stability and growth?
While many start-ups launch as one-man/woman-band businesses, consider bringing in family members, co-management, employees, accountants and other sources of help and support. While you may be highly skilled in your field, it can be difficult to handle all aspects of your business alone, while remaining inspired and motivated.
If you have a good team around you, you’ll find operational and administrative challenges less daunting. And if you can successfully make each team member feel that they are valued and respected, you’ll be surrounded by people who are just as dedicated to pushing your business to success as you are.
It’s also important to avoid naysayers; seek out team members who are brimming with positivity. This is especially crucial when working with family, because the family dynamic can sometimes bring added stress.
Develop a clear sense of your brand’s niche and image. If you don’t have a clear idea of what your service or product has to offer, potential customers or clients will be confused, and your opportunities for engagement will be lost. Not only do you need clarity of vision, but you must also find ways of clearly articulating this vision to a target audience through marketing and customer interaction.
This can mean engaging an accountant to teach you how to work through the ins and outs of the ‘financials’ involved with running your own business or hiring a business coach to teach you how to pinpoint your goals and determine the steps you need to reach them. Joining your local chamber of commerce can also be useful, because it will provide access to a variety of courses and workshops.
Think about the future and how your business will need to evolve to stay competitive. Pay attention to competitors and trends in both local and global markets. Above all, never rest on what you accomplished yesterday. Maintain your sense of momentum. If your business gets too comfortable, you’ll quickly find yourself left in the dust.
Should the owner of a growing business be a manager or a leader? The answer to this question is far from straightforward. Many would argue that they should strive to be both, but this is often not the reality, because business owners get dragged down by the pressures of the day-to-day running of the business. Consequently, they end up doing too much management and too little leadership.
There are substantial differences between leaders and managers:
The differences between leaders and managers are fundamental. Managers make sure that everything is controlled properly; leaders create the vision, the enthusiasm and the passion. The best leaders are those who inspire and create followers.
One of the biggest challenges facing growth businesses is how to mature from a small owner-managed business, where the owner is at the hub of everything, into a medium-sized business run by a board and a team led by a leader rather than managed by a manager.
The very characteristics that allow a start-up business to thrive can be detrimental when the business starts to achieve scale. An entrepreneur starting a business is usually a highly driven and determined individual. You need drive to get a business off the ground and you need to be incredibly focused. Many entrepreneurs ignore rational, risk-based arguments as they pursue something they believe in, which means that ultimately the business thrives because of that sheer drive.
Business owners therefore tend not to be easily swayed and as the people funding the business they are often very tight with financial control - which is fine when the business is small. However, as a business grows at some stage the business leader must begin to delegate, even some financial matters.
Likewise, small businesses leaders usually make all the decisions, but as a business grows to be 20-100 people strong, depending upon the type of business it is, this responsibility must also be shared to create space for the leader to lead rather than do. And as the business grows it is important that the leader’s vision is not drowned by their desire to control all aspects of the business.
One fundamental area that is key to business success is communication. For small businesses communication is not a problem – the boss just says what they want done! In a larger business it can’t work like that. The leader can’t communicate directly with everyone individually; there must be communication processes in place. So at some stage, internal newsletters, management meetings, department meeting and workshops become necessary, often to the great frustration of the entrepreneurial business owner who just wants to get on with doing ‘real work’, not realising that for a medium-sized business and larger, the real work for the leader is largely communication!
Entrepreneurs who started a business and grew it through its early stages often see such management meetings and internal communication processes as unnecessary overheads. Everyone should just know what they need to do. And the lack of such coordinating activity is what causes many businesses to plateau and stay small. By contrast, the leader who successfully grows a business of scale understands that management processes, communication and leadership are critical to successful growth.
Every small business of course has big dreams, but business leaders with a desire to grow must ensure that as they grow, they adapt their style of leadership to suit the stage of growth.
Starting a business can be an amazing time. The excitement of new opportunities and that fabulous feeling when you land a big new contract are unrivalled. However, it’s a sad fact that most businesses fail in their first year or two - so by getting through this challenging period you can dramatically increase your chances of success. So how do you do it?
Many one-person businesses suffer from this phenomenon, caused simply by a lack of capacity for business development. You win a contract; work flat out on it for three months; get paid and then… Nothing. And you’ve been so busy doing the work that you haven’t had any time to line up new customers or source some new leads. Given it can be weeks or even months before a new lead can provide you with any work, you’re now faced with the prospect of a difficult fallow period and possibly a rapidly dwindling bank balance.
The best way to avoid these problems is to set aside a dedicated time every week for business development. This could be anything from emailing prospects to attending networking events - anything to keep your pipeline full of potential work opportunities.
When you start your own business the only thing that’s really changed is your business cards. Do you need to rent a desk or office or can you work from home until the business is more established? Do you really need that plaque to go on your wall or could that money be used better elsewhere?
Being your own business cannot be improved by unnecessary physical ‘accouterments’, so think carefully about any purchases you think you need to make because you’re now ‘a business’.
Some businesses fall over simply because their founder was so busy ‘being the business’ they forgot the legal fundamentals. Get set up as a limited company straight away - this can be done online quickly and cheaply. This will provide legal separation between you as an individual and your business, so should you go under with a long line of creditors you only stand to lose what you invested in the first place - not your house or your car, for instance.
Secondly, get contracts in place for all your work. These will vary depending on the kind of work you do, but standard pro formas can be found online easily. These can protect things like intellectual property and usage rights to your work.
Lastly, get insurance. In many cases this is legally required and many business owners simply don’t realise until it’s too late!
Blog supplied by Darren Fell of small-business tax specialists Crunch Accounting.
Having walked past a shop called Recession this morning, I was reminded yet again about the tough times that small firms continue to face. All the small-business owners I meet through my work as a coach are really busy. They tend to work much harder than their counterparts in the corporate world and are frequently more motivated, too. There’s so much involved in running your own business – and not many people to help.
Here are my top six tips on how to give your small business the best chance of surviving when times are tough.
It seemed to work for Bill Gates. He’s reported to have spent one month every year thinking up ideas for his business. Yet in a survey of 4,000 UK businesses, 95% of small-business owners didn’t even have a business plan. Owners spend all their time working in the business, leaving no time to work on the business. But failure to plan, as time-management guru Alan Lakein said, is indeed planning to fail. It’s like setting off on a journey without knowing the eventual destination – fun, perhaps, but unlikely to be effective. Just half an hour a day spent thinking and making plans will enable you to focus on what’s really crucial to the business. Urgent isn’t necessarily the most important.
Failure to manage cashflow kills more businesses than anything else. Cash is king when it comes to the financial management of a business. The lag between the time you have to pay your suppliers and employees and the time you collect from your customers is the problem – and the solution is effective cashflow management. This means delaying outflows of cash for as long as you can, while encouraging anyone who owes you money to pay it as soon as possible.
A simple analysis of your customers can be enlightening. Who are most profitable/most rewarding to work with/have the most potential? It’s said to be five-times more profitable to spend time and money on retaining existing customers than it is to acquire new ones. Michael LeBoeuf’s book, How To Win Customers and Keep Them for Life, highlights the reasons why customers leave - 68% of them because of an attitude of indifference shown by the owner, manager or an employee. Given this, how valuable it is to fold your customers in a warm embrace and love them to death.
Social media is no longer the preserve of teenagers. Indeed, it’s hard to think of a business that cannot benefit from using social media. LinkedIn, Facebook and Twitter are now essential tools to connect with customers, prospects and suppliers. Your competitors are already using social media to boost awareness, enhance reputation and win business. If (like me) you didn’t know where to start, make it your business to find out more about using social media for business. It could bring you many more sales.
It’s no coincidence that businesses that increase and hone their marketing spend in a recession are those that emerge strongest when recovery comes. Bill Gates (yep, him again) famously said that if he was down to his last dollar, he would spend it on marketing. Research has shown that companies that increase their marketing spend in a recession recover three-times faster when economic conditions normalise.
People don’t stop buying in a downturn, they just focus on value and “out of sight, out of mind” still holds true. Customers will notice if your brand falls silent and will smell failure. So set objectives, be clear about what you want your marketing to achieve, and measure the results. The more you know about your customers, the better you will be able to target them successfully by understanding their problems and presenting appropriate solutions.
The internet – and Google in particular – represent cost-effective platforms. Used properly, marketing has the power to stop a business being caught like a rabbit in the headlights.
Many small-business owners try to do everything themselves, which is plainly daft. Even decathletes who train for years have events in which they perform better than others. No one can be a jack-of-all-trades.
How much better is it to defer to a bookkeeper or PR specialist than to attempt to muddle through yourself? It can be immensely liberating to free yourself up to do the parts of the job that are most rewarding or to which you are best suited. Leave the rest to people better qualified than you. Smart business-owners know when to outsource, delegate or automate. You will more than make up the money it costs you through focusing instead on getting more sales or developing product or service enhancements.
By Bristol-based business coach Chris Kenber.
Tristram Mayhew, “Chief Gorilla” at popular forest-based leisure adventure attraction Go Ape, provides his eight top tips on how to be a successful ‘On-tree-preneur’.
1 Find a business opportunity that you enjoy
If you do something you actually love, you're more likely to be successful at it. It will be fun rather than just work and your natural passion and enthusiasm will rub off on those around you. That can make all the difference.
Starting a business is probably the single most risky financial adventure you are ever likely to make. You can minimise the risk of failure by learning from the wisdom of those who have gone before you. There is a library full of great tips and advice that, for just a few pounds, might save you tens of thousands of pounds. One book that I recommend is Guy Rigby's From Vision to Exit.
Once you have got through the start-up phase, if you want your business to really take off you need to give it some rocket fuel. I put Go Ape through Cranfield School of Management's 'Business Growth and Development Program' (BGDP). It takes four weekends over eight weeks and is only for owner-managers. It is a potent mix of practical theory and case studies, which you then apply to your own business. The 30 or so other owner-managers on the course work on your business with you, and you on theirs, their advice and experience was invaluable. The BGPD was worth every penny. It was the point when Go Ape grew up from being a good idea into a great business. Our growth and profitability took off after that.
If you know where you're going, you're more likely to get there. So come up with a plan for your business. Be bold. Go for some big, hairy goals. It needs to inspire your team and your customers, and ideally put fear into your competitors. It should set out your vision, mission and tactical plan. Once you have worked out where you want to go, ask yourself what you have to do for that to happen. This will become your 'to-do' list.
5 Delegate and empower
If you are to manage rapid growth successfully, you must bring on a great team. You can't do it all. Unless you can make yourself redundant, you won't have a business that can truly grow, nor will you have a business that you can sell. Encourage your team to take entrepreneurial risks. Don't punish them if they make mistakes, but praise them for trying. If you recruit good people, when you drop them into the deep end, most will swim rather than sink.
6 Become a strategist
One of the main lessons from Cranfield is that you have to stop being the 'Hero' (ie someone who makes all the decisions in your business), because this limits your businesses growth potential. You need to become a 'strategist' and work on the business not in it. Your job is not to do the heavy work, but to look ahead and guide your business around obstacles, coaching, encouraging and motivating your team as you go.
Running your own business can be quite lonely. Getting to know other people who are in the same boat can be a great source of encouragement and advice. There are lots of clubs and social events for entrepreneurs, so try out a few and make the most of the advice and support on offer.
8 Enter business awards
If you are aiming high and want to be the best, why not enter some business awards? Entering the National Business Awards is a great test to put your business through. The Application process makes you take a long cool look at your whole business. Whether you win or not you get feedback on how well your business scored in a number of key areas, which helps you target improvement. If you do win it's a terrific morale boost for your team, and also introduces you to a stellar network of useful contacts and leading entrepreneurs. Entrants for the 2013 National business Awards need to be submitted before 31st May.
Business confidence is a funny thing. The news can be full of doom and gloom and yet many small business owners manage to remain resolutely positive. Certainly, when we polled small firms last Spring, there was a good deal of optimism, with 48% saying they expected 2012 to be better than 2011.
What a difference a year makes. Now, it seems, business owners are considerably gloomier. Our February 2013 small business survey, sponsored by Sage, found that just 34% of business people are optimistic about the year ahead.
And it seems this dramatic drop in confidence is having some knock-on effects. 6% of respondents say they plan to make redundancies — double the 3% who said the same in 2012.
In addition, 22% are unsure about the prospect of redundancies, significantly more than the 10% who said they were unsure about laying off staff this time last year.
It looks as though many are putting growth plans on hold as they adjust to what some are calling “the new normal” — economic stagnation. For instance, just 32% told us they planned to spend more on marketing — a big drop from the 51% that were planning to invest more in marketing in 2012.
Most small firms say that Government support is not sufficient — a total of 72% of respondents told us that the Government will either not do enough or not do anything to support businesses in 2013. Mind you, last year that figure was 73%, so there’s little change there.
What has clearly changed is business optimism.
SME owners are the backbone of the British economy, making up 99.9% of all UK private sector businesses and contributing 48.8% of private sector turnover (according to the FSB).
Small business owners have done everything within their power to ride out this storm — from painful belt-tightening to finding new gaps in their markets and opportunities to grow. But it has been a long haul and there’s a sense that they are growing weary.
It’s important not to give up now. We recently published James Hay’s blog, Keep swimming, on Marketing Donut, extolling the business benefits of simply keeping going. It clearly struck a chord.
The relentless bad news can be hard to ignore but small firms need to stay positive if they are to survive and thrive. Let’s hope that in confidence terms — as well as economically — we have already hit bottom.
Rachel Miller is the editor of Marketing Donut.
Those who completed the survey were automatically entered into a draw, with a spanking new iPad mini available as a prize. The winner was Jackie Beard, owner of Gloucestershire-based florist and flower arranging business Jessabel Flowers. Many thanks to sponsors Sage, as well as Jackie and everyone else who took the time to complete the survey.
All entrepreneurs are self-reliant. I know – I’m a serial offender! But almost everyone who starts a company cannot make much of it without support from a whole range of people – both in the company itself and outside.
These people are always chosen to be the best, most reliable, the most trustworthy. So how does it come about that dynamic self-starters with handpicked teams frequently not only make mistakes, but costly wrong decisions too?
Part of the explanation comes from our personality profiles. The kind of people we are not only affects how successful we are with the outside world (customers, suppliers, the authorities and so on). It also impacts on relationships and effectiveness within the company itself. In my book, Decide – Better ways of making better decisions, I have included advice from acknowledged experts and a guide to the main personality types, and how you can cope with difference and similarity – and importantly pick successful teams.
But decision-making is not a straightforward process, and so-called Decision Traps lie in wait for the unwary. Below I list some of the most lethal. You may well be able to identify examples from your own experience.
The decision-maker is so excited about a potentially exciting outcome (the upside) that he/she seriously underestimates how bad the downside could be if everything goes wrong. Most of us are optimists and it’s natural to be enthusiastic. But wise decision-makers always weigh up reward and risk, and it’s often sensible to turn down an option (however glittering) if the downside could be disastrous enough to break you.
A group of really bright people cannot believe they can ALL be wrong! But it can happen – particularly if the balance of personalities in the room is skewed on the positive side. Ten people are as capable of being wrong as one. There is a related trap called ‘Confirming Evidence’ – when we are prejudiced in favour of people who think like we do. The trick is to make sure it is always someone’s job to be the devil’s advocate, and ensure frequent reality checks.
Sometimes it is tempting to go ahead and make a decision even before we have all the data we need. And it can be fatal to press the button before you have all the necessary information and research. But this is where judgement comes in. It can be almost equally wasteful to insist on having more and more information to the point that the opportunity has been lost. That is ‘information overload’.
This is a polite term for a hasty decision that can come back to bite you. Governments and ministers do it all the time. We are all inclined to kid ourselves we have thought things through when we haven’t.
Really bad this one – making the same mistake again and again.
David Wethey is author of Decide – Better ways of making better decisions, published by Kogan Page.
The idea of entrepreneurship and the real-life, day-to-day experiences of entrepreneurship are two vastly different things. In my first serious venture our team raised $250,000 for an online financial technology start up, which was focused on educating and assisting investors to develop asset-management strategies to self-manage their own capital in various financial markets.
Our business model was strong. The company had several key revenue streams and after nine months of pre-launch development and another nine months of post-launch operations, the company finally began to make money. Then, for an additional six months the company largely broke even. And, finally, after 24 months, the company began to make enough money to make the venture worthwhile.
Through the life of our company, our team learned many lessons, but one has stuck above most. A successful entrepreneur is characterised by many attributes, but ability to manage risk is key. Most people never even consider this aspect of business, but the ability to actively manage risk is often the difference between entrepreneurs who have a great idea and entrepreneurs who actually build successful companies.
The greatest risk
The single greatest risk for any entrepreneur is running out of cash. A business fails when it runs out of cash or available credit. If a business spends more than it makes per month, that burn rate will eventually cause the business to fail once all cash is spent and available credit is used up.
Therefore, every entrepreneur should be fixated on controlling costs and managing this risk. Let’s discuss a few key points that will empower aspiring entrepreneurs to successfully manage the risk of cash flow.
Cut out the non-necessities
When starting a business it can be tempting to spend money on non-essentials, such as nice office space, beautiful office furniture, expensive computers, administrative staff, etc. This is a black hole of lost cash, however. Until a business is generating healthy net-positive monthly returns, it is wisest to keep in “bootstrap mode”. The only money spent should be what is absolutely necessary to create the business’s product or service and take it to market. Bootstrap mode may not be the most fun experience, but it’s necessary and often means the difference between a business idea and an actual business.
Know your burn rate
A second temptation many entrepreneurs face is to ignore the numbers. “If I just keep my head down and keep moving forward, we’ll make it. The numbers are depressing, so I don’t need to look at them.” This is disastrous. As a business owner and leader, one should always have a direct pulse on the cash position of your business and how cash is flowing in and out of it. One of the most important numbers is the burn rate. This is the amount of money you are losing each month.
If you divide your cash reserves by the burn rate, you’ll get the maximum number of months the business can survive at its current trajectory. Know this figure at all times, and be proactive about cutting costs to extend the lifeline of the business.
Entrepreneurship is a great challenge. Put yourself in a position of power by taking a proactive stance toward active risk management and seek to manage your cash risk by consistently keeping expenses low during the early stages of your company’s growth.
This has been a guest post by Danielle Thomas from Merchantseek.com.
Part of the job of running your own business is figuring out how you can get ahead of the game. You need to have processes or systems that can focus on you finding cuter/smarter/cleverer ways of doing things. You must find ways that are cuter/smarter/cleverer than the way your competitors do things.
I will suggest two options:
1 The ‘Think On’ Hour
Most business owners arrive at work before the rest of the team. The place is quiet and there are far fewer interruptions. I know of some business people who take this time every day and spend up to one hour simply sitting and thinking about how to improve things. After all, if we agree that we need to spend more time working on the business and less time working in the business, this is a blindingly obvious thing to do – even if you only do it once a week!
2 The ‘KPI Focus’ Hour
A more focused and less freeform approach may produce even better dividends. We all have basic key metrics we use to measure and evaluate business performance – key performance indicators. If you don’t know what I am talking about you can stop reading now and just go for the ‘Think On’ Hour option.
Use your KPIs (or metrics or whatever you wish to call them) to evaluate performance. Once a week spend an hour (alone or with the team, whatever works best for your business) and focus on the one key issue you need to improve in your business. This can be called your single, most-important, over-arching goal for the coming month.
Decide what the over-arching goal is going to be then brainstorm, Google, steal, talk and debate about how you are going to improve your performance. Decide what you are going to do. Make it a high priority. Commit to it. Communicate it. And do it.
Robert Craven shows MDs and owners how to grow their profits. He is a keynote speaker and author of business bestseller Kick-Start Your Business (foreword by Sir Richard Branson). His latest book – Grow Your Service Firm – is out now. He also runs The Directors’ Centre, helping growing businesses to grow. For further information contact Robert Craven on 01225 851044 or email@example.com
A business plan is the equivalent of a roadmap for businesses. It is a document that provides vision, goals and benchmarking. It creates momentum and also provides an opportunity for a reality check – what worked last year, where the gaps are and what next year is going to look like.
Many start-ups fail because they lack a map to guide them through their new business venture. A research study conducted by simplybusiness.co.uk with 400 British entrepreneurs shows that 54% have no written business plan and more than two-thirds make decisions based on gut instinct alone. According to the Federation of Small Businesses: “Britain’s best performing small companies are being hampered by a failure of the planning system to allow them to expand”.
Writing and maintaining a regularly updated plan can have a profound impact on business success, helping to demonstrate the viability and value of a business to potential investors and illustrating how investment will be used to grow sales and profit. It also provides a useful reference point and motivational tool for the business owner.
In terms of content, a plan should document objectives and strategy across three key business areas; marketing, operations and finance. These aims should be quantifiable and split between short term (next 12 months) and longer term (next three years). Other sections can include:
In summary, a business plan helps to focus clear roles and goals and motivates business success. As Matthew Brearley, former board director of Vodafone, said: “With a great plan you can engage others with a sense of direction and purpose, align all activities and review progress."
John Davis is managing director of Business Centric Services Group.
In a business mentoring relationship, a seasoned business owner meets with a new or potential business owner one-on-one to give advice, focus objectives or simply boost morale.
The relationship can be a paid arrangement organised through a business support group or free advice from a local business expert. Either way, there is strong evidence that mentoring hugely benefits small businesses:
However, despite these encouraging statistics, surprising evidence has emerged recently that suggests 42% of small-businesses owners have never consulted a mentor (source: Moore & Smalley accountancy survey). Furthermore, according to a recent poll we conducted at BCSG, 55% of start-ups do not plan to use a mentor once their business is up and running.
It can be easy for small-business owners to get caught up in the whirlwind of day-to-day tasks involved in running their business, but putting aside time for regular mentoring sessions can prove invaluable, for personal development and business growth. Specific ways in which mentors can positively impact success include:
Above all, effective mentoring can foster a long-term, mutually beneficial relationship between mentor and mentee that can span the length of a career.
The Government is encouraging small business growth through mentoring by promoting initiatives such as MentorsMe, a national portal that gives businesses a single, easy-to-use search engine to locate organisations that provide mentor services. So far, 100 mentoring organisations are accessible through the portal, providing details for more than 16,000 trained mentors, and organisers are aiming for a network of 26,000 mentors by the end of September 2012.
In many cases, as a small-business owner it’s impossible to have a separate project manager for each project, especially if you’re a start-up, in which case it’s probably just you. However, projects still need to be accomplished on time and within budget and you don’t want to appear super small, because some people will believe this is a liability.
As a start-up or small business, you have many advantages. Firstly, you can complete projects done for less because you have less staff overheads. This can be very stressful, because as the sole business owner you must handle all projects without a project manager. But thankfully, because of cloud-based technology, it can be done.
How can you do it all? How can you be professional, accurate and continue to garner new clients when it’s just you? If you understand the dynamics of project management which are:
Then you can figure out how to control each one of these areas using technology. Today, there are many cloud-based applications that can assist you with running your start-up. The cost of entry into using project management software in the cloud is very low. In many cases, your small business can be up and running using enterprise level software for less than the cost of buying MS Word.
You can afford to use systems such as Basecamp, Central Desktop, Google Apps and others. It used to cost thousands of pounds to equip an office with essential project management software, but with access to systems in the cloud that’s no longer true. In addition, while security used to be a huge issue when it came to the cloud, this is no longer a big issue. Cloud-based application creators are aware of security issues and work diligently to harden the security of their servers. In fact, your data is probably safer in the cloud than it is on your desktop computer.
Elke Schmitt works as a marketing manager for GetApp. Her mission is to help startups select cloud business apps and tools to be more efficient and cost-effective.
As a small-business owner, you are busy and your time is limited. Social media is ubiquitous and may seem like a great way to communicate with hundreds (or maybe even thousands) of people really quickly, but it will only work if you do it right.
1 Know your audience
The first thing you want to do is figure out who you want to reach – new customers; existing customers; past customers or a more targeted group? For new customers, specify as much about your ideal client as you can. Are they male or female? How old are they? What hobbies do they have? What social media do they use regularly? There are, of course, more details you can add, but you must build a picture of your perfect punter.
If you want to talk to existing customers, find out what social networking sites they use the most. You can make free surveys online, hold focus groups, ask questions on relevant forums and more. If they don’t spend a lot of time on Twitter, there’s no point in creating an account. Your target audience should dictate the social network(s) you are on, so once you know where they like to hang out, it’s easier to establish a goal.
2 What’s your goal?
You should know exactly what you want to achieve. Do you just want to provide another channel of communication between your business and your customers? Are you trying to increase awareness of your brand? Are you looking for another way to distribute great content? There are loads of things you can do with social media, but don’t try to do them all. Identify your most important goal and focus on that.
Whatever your goal, it’s a good idea to incorporate your social media activities into everything you do. Web design software makes it easy to integrate social elements on your website, and you can talk about your social media accounts in your newsletter, as well as list the social media links on your marketing materials. It also works the other way. Use your social media channel(s) to deliver relevant, useful information to your customers.
3 Plan your time
How much time can you commit to social media? If you can only spare a few hours a week, you may not see much of a return for your time. In fact, having a poor social presence can be more damaging to your brand than not having any – it will seem like you’re ignoring your customers. You’ll need to work on your account consistently to build momentum and a reputation.
If the responsibility will be shared among two or more people, consider creating some basic guidelines so everyone knows what is expected of them. Among other things, it’s important for everyone to use the same tone of voice to maintain brand consistency.
Much like Rome, nothing awesome is built in a day. If you’re expecting to see positive results in a few weeks, you’ll be sorely disappointed. Allow at least six months before evaluating how well you are doing, then decide whether you want to continue.
4 Monitor your success
You should regularly monitor the impact of all of your marketing – including any social media activities. How you do that will relate directly to the goal you set. If your goal was to offer a fast way for customers to ask you questions (to reduce incoming support emails and calls), find out if it worked. There are a lot of different calculations you can do that involve percentages, comparisons to last period’s figures, and time spent per query, or, you could use the built-in analytics in your social media accounts.
However, you might get a better understanding of how you are serving your customers by simply asking them. Again, you can make use of free survey software, emails, focus groups, etc. If your customers love the new social media support option (and it’s actually being used enough so you can devote less resources to your traditional support methods), it is a good idea to keep it.
The underlying key points are these: while social media is free, it takes a lot of your (or someone else’s) time to research, plan, promote, execute and assess your activities. You’ll want to see a return on investment at some point, so you should only do it if you are going to do it well.
I regard myself as a bit of an expert on business planning. I even wrote a few books about it, with “imaginative” titles such as Planning for success, TENbizplan, Business planning for the social economy and the best-seller Start your own business: a workbook.
With regret, I’ve concluded that my books are no longer as relevant. They focus on a lot of preparation, lots of research and a very formulaic approach towards a business plan document. Too slow, too cumbersome, too detailed.
The tension is between the need for preparation, preparation, preparation, the way you communicate your venture and coping with the chaos and speed of change that makes long-term planning impossible.
If a “Twitter” becomes mainstream in a month, there is no point in having two-year planning cycles. 42% of the most successful entrepreneurial businesses in the USA have no plan at all.
Rework by Jason Fried and David Hansson is a book that tells about the journey two entrepreneurs made setting up a company that builds project management software with huge success (three million people around the world use their product and they are generating multi-million dollars of profit). I think we can agree that we can regard them as experts.
From Rework we find out that:
The whole message of the book is that it is not about long-term planning, but short-term movement.
A three-year business plan is pointless
I can quote a long list of books that talk about how the business world is getting more and more complex, chaotic and moving at ever increasing pace. (“funky business”, “future files”, “break from the pack”, to name a few). Combine that with information overload and you can see why a three-year business plan document is completely pointless.
Ron Immink is managing director of BookBuzz
In the past 30 years I’ve set up three businesses. I started my current business, Stinkyink.com, on 22 April 2012 (yes, we were ten years old last month!), knowing nothing about ecommerce. To make matters much worse, within months of starting the business I was almost bankrupted by a national ring of scamsters who defrauded me out of £32,000 using stolen credit cards.
The police could do nothing and I was at a very low ebb. But I’m not a quitter. I discussed it with my dog and decided to carry on! That really coloured the first four years of the business because it made it hard to get credit from suppliers as our balance sheet was so weak. It taught me the importance of having cash in the bank and watching my P&L like a hawk.
However, the gamble paid off and within two years my company was in profit and today Stinkyink.com employs 14 staff and turned over more than £3m last year. I’m really proud of what we’ve achieved together over the years in a highly competitive market. We all work hard to look after our customers and that has paid off with them staying loyal and recommending us.
I’m often asked for my tips for new businesses. It’s different for everyone, of course, but these tactics have worked for me:
If you start a business with a friend, you will fall out eventually. That’s my experience, anyway. When my first business failed the bank chased me for the total amount of the guarantees when my partner couldn’t pay his share. This was £40,000 and took 10 years to clear.
Putting time and thought into a business plan and revisiting it regularly is worthwhile. Unless you have a target to aim for you won’t know when or if you’re succeeding.
Never take a charge on your house and try to avoid providing more information than a lender requires.
Do your accounts, get invoices out promptly and don’t accept being messed around over payment. Pay your suppliers on time, too – it gives you their goodwill and possibly more credit.
One of the many bonuses of online selling is you can find out where your customer has come from; how they searched for you; how quickly they left and whether they actually bought anything from you. Using this information will enable you to improve your website and also your customers’ satisfaction, which can only be a good thing.
It’s impossible to place a value on a hardworking employee that cares about your business and where it’s heading. Spending the extra on wages for key skill sets or talents that are suited to your business can be the difference between a 5% and 20% growth in a start-up’s early years.
Over-50s unemployment is an increasing problem. In fact, the increase in the unemployment rate for this group is growing twice as quickly as the rate for the widely lamented 18-24 year olds.
My colleague, Kay Gorman, and I founded skilledpeople.com when we retired. We had amassed a wealth of invaluable skills and experience we realised was of most value to SMEs and start-ups. Both can benefit enormously from instant experience and know-how.
We believe that the over-50s can help galvanise the economy if small businesses know they are available and how they can connect with them. The concept behind skilledpeople.com is a particularly good one for SMEs, because small business owners simply don’t have the time or resources to train poorly educated young people.
The over-50s come ready packaged with a quantifiable skill base, a good education and a willingness to put their experience to good use. Unfortunately, the issue of the unemployed over-50s has gone largely unnoticed by the press. Youth unemployment, it would seem, has taken precedence and as a result in the public mindset. However, the problem is real and it’s getting worse. There are many initiatives to get Britain’s youth working but besides skilledpeople.com I can’t easily name any for the over-50s.
In February, Office of National Statistics unemployment figures revealed that vacancies and skills demand is increasing. It is well documented that one of the biggest hurdles facing SMEs and start-ups is finance. The feedback we have received from our site members is that this directly affects recruitment, with many small businesses unable to afford salaried employees despite needing their skills.
Skilledpeople.com has a reservoir of talent that SMEs can tap into at very economic rates. We offer a unique service supporting both business growth and getting experienced people back into productive employment – a true “win-win”.
Our ‘Project Assignment’ service covers short project work (1-20 days), where SMEs can take advantage of the skilled specialist services of candidates to help them with activities such as HR, marketing and business planning, but without employing them full time. This makes it viable for small firms to get the right skills at low costs.
Small businesses need support if they are to help the UK out of recession. We are also in danger of losing a tremendous amount of knowledge and experience from professional people aged 50-plus who find themselves out of work.
David Hiddleston is chairman of skilledpeople.com, which connects small businesses who want to expand and improve with skilled, experienced people, typically 50+ who add value and quickly become productive. Contact them on Twitter – @skilledpeople
Two of the most important metrics a start-up needs to look at are customer retention and churn. These figures should be two of your key performance indicators (KPIs), and getting systems in place early to track and minimise issues in these areas will set you in great stead for your business life.
Customer retention is a measure of how many of your customers are loyal to your brand and return for another visit. Customer retention only deals with existing customers, with no consideration for new customers.
All companies spend a lot of money to acquire customers so sometimes it can be shocking how easily we let them walk away. It costs an estimated seven times more to acquire a new customer than it does to sell to an old one, due to factors such as lack of brand recognition, offering new customers incentives (e.g. a discount) and not having contact details to initiate a conversation.
First things first, decide on a ‘churn time’, i.e. a period in which you would expect a customer to make a repeat purchase. Where I work an average user would be expected to re-order every three months, and in total we’d expect the vast majority of customers to have ordered at least every six months before thinking something is wrong.
This will obviously vary by product, so a supermarket’s churn time will be vastly different to a holiday booking’s company.
Next, you simply take whatever date period you wish to calculate retention for, and compare how many existing customers ordered within the expected time frame.
For example: to calculate our recent retention rate, we’d look at existing customer repeat orders in the past three months, and compare these customers to how many ordered in the three months before.
Customers ordered from Jan to Mar = 500
How many of these customers ordered again between Apr-Jun = 400
Customer retention rate - 400 / 500 = 80%
Churn, sometimes known as customer attrition, is the opposite end of the spectrum, i.e. how many customers don’t return to your company after making a purchase. Customer churn takes into account new customers in its calculation, which is a major difference to retention metrics.
Churn is obviously something you want to avoid, as it’s nigh on impossible for a business to grow with a high churn rate. Thus it is a fantastic indicator of whether something is wrong with your product or service.
Again, the first step is to decide on a churn time as we did above.
Next, ensure you can accurately track the total customers you have in a given time period. Don’t forget to include all the different ways a customer can reach you. For example, website, fax or phone orders all count as conversions in our system even though they are processed and recorded differently.
Now to calculate! Imagine a company with a churn period of 30 days.
Day 1 - you have 100 customers
During the next 30 days you acquire 30 new customers.
During the same 30 days, 5 of your existing 100 customers do not convert, or cancel a subscription for whatever reason (assumed lost).
Total customers = 100 + 30 - 5 = 125
Churn rate = 5 / 125 = 4%
Monitoring these two metrics gives a great performance benchmark that you can aim to better each period. If you implement any service changes or new features, these two KPIs will give you an accurate idea of the possible benefits to your company's performance. Couple this with some long-term customer value estimations and you’re well on your way to some fantastic performance data!
In my next post I’ll cover some easy methods of reducing churn and increasing your customer retention rates.
Running a business is hard work. There’s never a time when there’s nothing to do. So, it can be hard to stand back and get some perspective on whether or not you’re on the right track. If any of these tell-tale signs ring a bell, then stop, take a moment and think about where you’re heading.
If your business is overly dependent on one big customer, it’s not really your business – it’s theirs. You’re at the mercy of their decision-making rather than your own. Take a look at your customer mix, if more than 60% of your income comes from one client, you need to get your thinking cap on to reduce your dependence on them.
Is there someone in your business whose mind is the resting place of your most valuable business information? If there’s a key person in your company, you need to take steps to ensure their work is shadowed and their knowledge is captured.
Winning new customers is expensive. Even if you don’t spend vast sums on marketing, there’s always time gone into securing a new deal. If new customers slip through your fingers, by not staying with you for long enough to make a profit, you’re throwing good money after bad.
How do you generate new customers? If you’re mostly or wholly reliant on one source of new business, then there’s cause for concern. Imagine that tradeshow stops running, your telemarketer goes off ill, a key referrer goes out of business or your Adwords suddenly jump in price… Whatever the source, having just one is a risky strategy. You don’t want your business drying up because someone turned off the tap.
How much does your business earn for every hour you and your team put in? Understanding what people are doing with their time is essential to maintaining profitability. Are you using expensive people to do cheap jobs? A little analysis of what people do with their time can help you make sensible decisions about training needs, job allocation, and outsourcing.
Are you doing the right kind of work? Lots of small businesses keep themselves afloat by being a bit of a ‘jack of all trades’ – but this can mean that you end up becoming known for the kind of work you don’t actually want to do, or isn’t particularly profitable. If you can’t describe the wrong, and the right, type of work for your business you’re unlikely to be able to find more of the latter.
I know, I know – you’re a creative soul… But are you paying the bills? Getting on top of your numbers is essential in addressing all of the points above. If you can’t immediately bring to mind your business’s vital statistics, then you can’t make informed decisions.
Is marketing something you do if and when you find the time? Many small businesses find themselves head down delivering client work, and whilst doing so they don’t find time to promote their company. This means that when one project is finished they hit a dry patch. It’s the marketing equivalent of a yo-yo diet, and is about as good for your business health as it would be for your body. If you find yourself staring down an empty sales pipeline each time to lift your head to breathe… then you need to work on finding a low level set of marketing techniques that just keep going come what may.
A sure fire sign that something’s not right is a spike staff sickness. They could be working too hard, demoralised by work they don’t enjoy, or they could be bored of twiddling their thumbs as they wait for the next project to land. Either way, if a few of your team start going off sick, it’s time to ask some questions about how your business is running.
Now, it’s not scientific, and I can’t put a metric on it… but if you, the business owner, hate Mondays more than you used to, there’s something wrong. Running a small business is hard work. But, if you get it right, it’s also exciting and rewarding. If you’re not feeling this, it’s time to get some perspective.
Recognising the warning signs enables you to do something about them. So, if any of these look familiar it doesn’t mean you’re on the inevitable path to failure. It means you have the power to change it. The business-owner who is able to acknowledge and address a tricky issue is in a much better position than the one who can’t – or won’t – see the signs.
There's more great advice available on the Donut business survival guide.
The past few years have been tough for most businesses and even highly experienced business people have suffered. Many a good business that in more prosperous times could have been successful has gone to the wall, with failure often being outside of the owner’s control.
So, when should you accept that things are not going to get better?
Unfortunately, there will not be one clear sign that tells you it’s time to pull the plug – it will be a combination of factors. The important thing is to be looking for early warning signs.
The build up to failure maybe slow, with a combination of unmanaged factors leading up to the final nail in the coffin, including:
By this time alarm bells should be well and truly ringing, but the key is to put effective management reporting systems in place so that each month you are checking these figures and managing things BEFORE they get out of hand.
Even with effective management systems in place showing the business is going off course, the emotional attachment that the owner has can mean that the warning signs are ignored. Before they know it the business is beyond recovery and it is too late.
The tell-tale signs that this may be the case are:
The writing is on the wall and in all likelihood the owner is at the end of their emotional tether. Even if a solution was available, many business owners are so stressed at this point that they are unable to function effectively.
Quitting and closing the business is probably one of the hardest business decisions anyone ever makes. The success comes when the business owner recognises that this is the best route to take and puts the steps in place to close everything down.
Closing any business that does not have debts is quite simple. If it is a sole trader or unincorporated business all you have to do is complete the accounts, file the final returns, pay outstanding taxes, inform HMRC of the closure and physically close the business down.
A limited company must take a few more steps, including advising Companies House via a special form, telling shareholders, directors and so on.
However, if a business has debts it gets more complicated and expensive to close down the business – madness given in all likelihood there will be no funds available.
When there are debts involved there is a legal process to follow and it is best to seek specific advice from a specialist who can advise the best route – especially if you operate as a sole trader or have personal guarantees on loans through a limited company.
Using 20 years’ experience spent working at some of the UK’s leading businesses, award-winning chartered accountant Elaine Clark is the founder and managing director of www.cheapaccounting.co.uk, an online accounting service aimed at small businesses with big ambitions.
There's more great advice available on the Donut business survival guide.
Difficult trading conditions call for difficult decisions. When markets are contracting, it’s no time to put your head in the sand. But what do small firms need to do in order to survive?
We asked some small business owners, including our followers on Twitter and Facebook, what they do to get going when the going gets tough.
“Don’t delay making difficult decisions. If something is not working respond quickly and do something about it,” says Neil Westwood founder of Magic Whiteboard. “Only spend money if it’s going to add value to the business. Keep a close eye on your margins and remember to make a profit.”
“Don’t compete on price — you can’t, and you will just devalue your brand,” advises Hayley Chalmers founder of clothing retailer Short Couture. “If your product or service is worth what you are charging for it, then your challenge is to target the right customers who are willing to pay that price, and do a good job of selling to them. If you keep reducing the price you are eating into your profit and not necessarily increasing sales – just changing who your customer is.
“I try never to lose sight of the back office costs,” adds Hayley. “I keep re-evaluating processes and sometimes I can make something more efficient — sometimes it’s by using a different product/supplier or by doing it differently.”
Being adaptable is important says Denbigh Army Surplus. “We have several selling channels so if one of them is quiet the other usually takes up the slack. Ultimately, it's a giant game of chess and you have to use your instincts, drawing on the knowledge and experience you have in your industry.”
Many long-standing businesses have been through hard times before. Rich Brady reveals how his family business got through a previous downturn. “Some lean periods are difficult to plan for. Twenty years ago we purchased the unit we're in now and after moving in we had the worst January, February was no better, sales continued to drop in March and April and we were really beginning to panic.”
Spending was cut drastically, as Rich reveals. “There were several months when we didn't pay ourselves anything.” Cutting back can help he adds — “You don't buy any new stock, marketing budget is massively reduced or scrapped. Often your competition, though, will be suffering the same fate and that creates opportunities. Perhaps a collaboration or investing more in marketing while the rest of your sector is holding back may help you to stand out. But first and foremost you should position yourself so that you can cope with a lean spell.”
But starting up during a downturn can be a good thing, says Julia Lowe of Farm Toys Online. “I was told that it is always a good idea to start a business in a recession. That way you have to concentrate on every aspect of the business from the word go and if you can make a success of a start-up in a recession — things can only get better!”
Make sure your business is visible on social media sites, recommends Sharon Bassett, co-founder of coaching firm A-Star Sports. “Don’t underestimate the value of social media, even if it looks daunting. If what you deliver is up there with the best, don’t be afraid to let people see that and they will start talking about it. Embracing social media over the last few months has been crucial for us to develop our customer base, find suppliers and open up PR opportunities.”
There’s no end of advice and support from fellow entrepreneurs out there thanks to Twitter. Here are some of the tweets that we’ve received about business survival:
Sandy Banfield agrees. “I think it is all about the mindset that is needed and having clear goals as to why you are doing it and what you are working towards,” says Sandy. “There will always be ups and downs with finance and cash-flow. But what keeps you going and moving forward is down to your why, your motivation to keep going when those tough times hit.”
There's more great advice available on the Donut business survival guide.