1 Challenge
- “My mentor said that I need to do a few things to manage and grow my small business. But she didn’t clarify what these things are. Help!”
2 Questions
- “What are the key things my small business must do to achieve growth and prevent issues?”
- “Why should I do these things?”
3 Ideas
As every small business owner knows, running a company is no piece of cake. There are numerous challenges and stumbling blocks that prevent a small company from achieving its goals. However, many of these challenges stem from not doing a few things right. If you own or manage a small business, make sure you do these things, and your company will surely thrive.
But what are these things?
This article explains.
#1: Manage Your Cash
To grow your business, it’s vital to keep track of cash flow. If you don’t, you will struggle to buy inventory, pay staff, suppliers and vendors, and pay your bills. And if your business ever has a low period, you will need cash to tide you over until the next client or project comes in. Poor cash flow management is one of the most common reasons for small business failure, so make sure you get it right.
Understand the various levers that affect your cash position:
- Do you buy inventory?
- How much should you buy to run the business, and how much should you keep in reserve?
- How do you collect payments from clients or customers?
- What are the payment terms and conditions, e.g. the payment period?
- Do you offer a long credit period or do you ask for immediate payment?
- Do you have any loans or other liabilities?
- How much do you spend on overheads, e.g. electricity, office rent, Internet charges, etc.?
- How big is your staff, and what is your cash outlay as you pay their salaries or bonuses?
- Do you depend on supplies that vary in price due to market conditions?
Monitor cash flow, find ways to increase it, and always maintain a cash flow reserve. For more ideas about cash flow and profitability, read our Tuesday Tips article: 3 Ways to Improve Business Cashflow and Profitability.
#2: Plan, Plan, Plan!
Planning is the key to business success. As the old saying goes, if you fail to plan, you plan to fail. Moreover, it’s not enough to create a business plan once (or once at the start of the financial year), and then forget about it. Your business plan should be a living document that you constantly update as needs, goals or market realities change.
Leverage the plan to understand whether any assumptions you may have about your business, industry or market are correct, or whether you need to change them. The plan should be strategic and financial, and include every other aspect of your business as well, including customers, staff, inventory, quality control, compliance requirements, etc.
Track actual results against the plan to understand if there are any gaps that need to be addressed. For example, in your plan, you might have assumed that you will be paid within 30 days. But the reality may be very different. Monitoring the plan and comparing it with actuals will show you where the problems are, and how you can address them.
Many business planning tools are available. Some even integrate with your accounting and other business software to help you plan in a holistic manner. This small investment now will go a long way in future, so do consider it.
#3: Recruit and Retain the Right Talent
Every organisation says that their workforce is their biggest asset. Whether they mean it or not, these words are 100% true – especially for small businesses. A smaller company does not have a lot of luxury with respect to staff. If you have a team of 5, and even 1 person suddenly leaves, it can shake up your operations, and have a huge impact on your outcomes, delivery and customer relationships. Pay attention to your people. Otherwise they won’t pay attention to your business!
Make it a point to track talent, and recruit the right people. Don’t settle for those who simply appear perfect on paper. Interview them thoroughly to understand if they will truly “fit” with your company and its as-yet nascent culture. Never hire people because they come cheap. Money can be a powerful motivator, so it makes sense to get a more expensive resource if they are the better choice for your company, project or client. Don’t be afraid to hire those with less experience. As long as you feel confident that they can get the job done, trust your instincts, and bring them on-board. Train them, and trust them to do their job. They will reward you with their loyalty and hard work.
It’s also important to make an effort to retain talent. Keep a budget for talent engagement activities. Invest in employee training and development. Encourage them to learn, network with others, and pursue work/life harmony.
Many small companies ignore the human aspect of business – and come to regret it when people start leaving. Don’t make this mistake, because as a small business, you really can’t afford it.
Conclusion
Small businesses have to deal with a unique set of challenges that larger organisations just cannot identify with. But by doing these three things right, you will be able to avoid these challenges and take your business to new heights.
What did you think about this short article? Share your thoughts!