Don't go Bust!
According to Xero – the online accounting service provider, mounting concerns such as late payments (54%), cyber-attacks (27%) and tax rates (44%) have left the UK’s entrepreneurs worried their enterprise will not survive into the near future. Other concerns include the rising cost of rent (25%), retaining staff (24%) and the cost of importing goods and materials (30%), are also pressing concerns.
Mitigating these issues has preoccupied small business owners for decades. Says Gerd Leonhard, Futurist Author: “Humanity will change more in the next 20 years than in the previous 300. We will see the biggest technological transformation in human history – impacting where, how and why we work.”
For owner/managers, in particular, developing their enterprises to become more robust in the face of these challenges is a priority. How the business landscape is changing to embrace more technology via automation; how employment has become more fluid; and with a very different trading environment expected thanks to Brexit, taking time to identify the weak points across a company will ensure long-term longevity.
Speaking to Small Business Essentials, Chris Evans, UK Manager and VP of QuickBooks, said: "First, utilise the digital tools at your disposal. It's tempting to think it's possible to treat business finances like personal finances and keep it all in your head. Still, with multiple bank accounts, suppliers and stakeholders in processes, it can all become unmanageable very quickly.”
Evans continued: “Second, address any potential issue facing your business head-on. Late payments can have a real and sudden impact on small business, but, tackling them can feel equally overwhelming. Our recent research found that 56% of all time spent chasing for payments takes place outside of the working day. It is vital to invest the time upfront to set up a system to minimise the administrative burden and its impact on personal time. Fully armed with all the data in one place, you're then able to make well-informed decisions – as and when things change.”
“Being able to keep up with new technology will help keep your business moving forward without ever getting bogged down by ageing systems and processes,” Smith concluded. “So many businesses today are still relying on technology that is certainly past its ‘best before’ date, and it can be expensive to upgrade everything at once. Stay ahead of the curve if you can.”
Business protection
Small Business Essentials spoke with Dr Alison Watson, Undergraduate Business Programme Team Leader at Arden University.
What is your key advice to small business owners to make their firms more robust?
“There are several challenges that small business owners face; ignoring these will leave the organisation vulnerable. Hence business owners and managers need to be aware of these, plan accordingly to address the issues to protect the company and respond to the challenges.
“Liaising with various professionals such as company accountants and solicitors will also keep managers updated on any threats. Contacting suppliers and maintaining a relationship with them is also advisable.
“Networking at business forums will enable owners to understand what other businesses are doing and how they are preparing for Brexit. There are many actions owners can take now, even before the government reveals any more future plans.
“Cybersecurity is a growing concern, and with the onset of the 4th industrial revolution, the use of technology is going to develop and grow. As such, small business owners need to ensure their company is safe.
“Firstly, they can safeguard their systems and seek guidance from industry experts. Many technology companies today have account managers who will help business owners set up their IT infrastructure. Once in place, the next step is for managers to ensure their staff are trained in cybersecurity to avoid any breaches to their systems. Protecting customer and employee data is essential, and managers will be held accountable regarding its safety.
“Late payments are not a new issue and being clear with all parties and stakeholders involved can help to avoid this. Drawing up contracts and agreements between creditors and debtors will hold both parties accountable for payments. If owners are unsure, they can seek advice; this may be costly initially; however, once robust processes are in place, misunderstandings in terms of late payments can be avoided.
“Another area that has been under constant revision is tax changes and rates. Company accountants will be able to advise business owners on this in advance and will produce auditable accounts within legal parameters. My advice would be to hire a professional to oversee the accounts and filing of relevant returns as this is an area that could be costly to an owner, if incorrect.
What are the first signs to look out for that a small business is running into trouble?
“The signs to look out for when a small business is running into trouble includes:
Sales turnover reduces
Lack of customers
Negative feedback from customers
Increased employee turnover
Not being able to pay suppliers
Lack of cash within the business
Too much stock
Not able to borrow money due to reaching the borrowing limit
Sources of finance regarding the business as a risk
The owners are not able to pay themselves
Good cashflow control has always been pointed to as a core component of a robust business. What other elements of a company should be strengthened?
“Other core components of a robust business include understanding the customer and delivering the right product and/or services at the right time.
“Being innovative and seeking future opportunities is also vital; in other words, staying current in the market.
“You also need strong leadership to be able to steer the company and its employees to success.”
Is the ability to find, and then hold onto skilled staff, a vital component of a robust business?
“Retaining skilled staff benefits the business in several ways. Firstly, they perform well to the advantage of the company, customers and profits.
“Secondly, they can be trusted and empowered to do their job, leaving the owner to be able to focus on strategy.
“Finally, they can be seen as role models for other employees within the organisation and mentor newer members of staff.
“While holding onto skilled staff is ideal, if staff do leave, it is not necessarily a disaster as long as the owner keeps the entire workforce up-to-date in relation to the business, sector and skills.
“Training and investing in professional development activities may seem costly in the short-term, but businesses thrive on high-performing teams. Utilising more experienced members of the team to train others, devising in-house training and encouraging staff to complete online training, for example, free Massive Open Online Courses (MOOCs), will all contribute to the enhancement of knowledge and skills within the workplace.”
What are the main challenges small businesses will face over the next five years? How can they change their business to meet these challenges?
“Additional challenges might come from existing competitors and new entrants into the markets. The internet provides access to most markets at relatively low costs. This increases the number of competitors and can lead to price wars and saturation within markets.
“Buyers will, therefore, have an advantage with who to choose from when purchasing products and services. To meet these challenges, owners need to ensure they deliver on customer expectations, build long-lasting relationships with all stakeholders and seek future opportunities ahead of their competition.”
A stable future Of course, no two businesses are the same. The issues facing a particular enterprise will often be unique to them. However, reducing risk and increasing contingency planning is key to long term profitability.
Kerry Jarred, Co-founder and Managing Director, Ignium Consulting says: “It is important to keep a focus on the key issues that really impact your business such as marketing, sales, productivity, employee morale and customer service. These activities cost money in any business. And those business owners who see that cost as an investment are the ones who thrive.”
Jarred concluded: “Taking your eye off the ball will cost the business long term. Keeping positive and investing in your business is the best thing that can be done right now. Put a plan together for 2020 to grow your business. Invest in sales, invest in your people, invest in your customers. Oh, and of course keep on marketing your business, for without marketing your business will suffer even more.”
2023 looks set to present a challenging environment for small businesses in particular. Keeping an eye on your company’s KPI’s and how your market sector is changing, will give you the foresight to head off any issues that could adversely impact your business.
Contact Ashored for more information and support with your Business.
