It’s tough in small business out there. It’s great to have a very cool business idea but just how do you stay in business in this uncaring world? Greg Muirhead, head honcho and accountant dishes out some needed realities.
1 Cash Flow
Greg Muirhead, from Muirhead and Associates Accounting firm, Sydney has seen small and medium firms rise and fall. He attributes 95% of small business failure the result of people not managing their cash flow . ” It’s a big issue. People don’t collect from debtors on time, or they haven’t worked out if their invoice terms are 30 day or 60 days and they go bust”. He sees a lot of small business owners doing large jobs and outlaying a lot of money and get caught short.
2 Evaluate Prices
Keeping prices the same isn’t necessarily great. Regularly evaluate prices you charge for goods and services. In the Australian Construction industry manufacturing costs in Australia face fierce competition from Asian suppliers and the current climate of ‘shopping around’ means loyalty to businesses is low. If calls to your business have slowed, talk to suppliers to get opinions on product trends and price forecast and make adjustments. Compare your competitor’s product to your own. Don’t be the guy who sells the same product as everyone else but at the higher price. If you have a more expensive product make sure your service is superior to justify your cost difference. Having fast delivery or being super reliable goes a long way in many industries and becomes your unique selling point.
3 Manage Your Costs
Greg Muirhead sees undercapitalisation as a massive problem for business owners, particularly in the retail industry. “Businesses get caught in a vicious cycle where they don’t have enough money to buy stock, they sell a limited range and think they can get away with it and it becomes a massive problem” he says. “If people want to go into business they need to borrow enought to buy the right equipment, enough stock and be able to do a proper fit out”. The same problem occurs in reverse with unneccessary factory or office space. Consider if you can work from home, a garage, cafe or a public workspace and whether or not you need those massive overheads? It’s amazing how often small business think the way they’ve always done something determines the way forward. Simple adjustments to phone, internet plans or vehicle expenditure can shave dollars from your costs. Have a conversation with your accountant to see what is the biggest drain on your finances?
4 Work on Weak Areas
No-one is good at everything. Look at weak areas of your business and make changes. Don’t waste precious time on unprofitable aspects. If your product is inferior to your competitor or your delivery time is slower get some advice. Use a consultant, an accountant or a friend. Greg says “people need to make a business plan prior to going into business and ask themselves why they think that particular business will be successful. They should know fully what will affect that business, like stock they can’t get rid of or a poor shop fit out”.
5 Keep training
There’s always self-improvement to be had. Great at your business but terrible at customer service? Need to update your book keeping skills or SEO knowledge? Each industry conducts inservice courses, even just a few small tips can benefit your business. Search through great e-books for confidence skills, computer or coding. Attend online webinars or take courses in your home after work if you can’t find time to attend professional training. It’s all there for the taking.
Outsourcing works and is smart. Don’t waste precious time on things people are trained and talented to do easily and quickly. Outsource your cleaning, writing, customer service, accounting, information collecting, surveys, catering and whatever else holds you back. Time is money.