To survive and grow today, business owners need to align themselves with the right networks, advice and support systems, but ultimately they must have the drive and ambition to succeed and the confidence to promote their business and be seen above the competition.
Battered and bruised, many businesses today are fighting for survival by cutting back on everything: wages, staff, product lines, marketing. But survival cannot be the end goal. In fact, cost cutting and restructuring are simply the first steps in consolidation and repositioning for future growth, according to Carol Bolger, Chief Operating Officer, Business Banking at Ulster Bank.
“Those companies that will survive are the ones that work aggressively to make changes that are critical to success today and in the years to come. They have realised that the cuts are only one step on the journey to future successes,” she says. This is a time of unprecedented opportunity to rethink offerings, markets, business processes and organisational structure - and to improve them to achieve growth.
Plenty of Support Available
It’s also a time when there is plenty of support available.“The days of the Irish entrepreneur making the long journey alone are less evident now. “Obviously business owners must be realistic about what they need to do to survive in the short term, but the challenge is to do those things in a way that moves the business strategy forward. Even leaders who need to make very deep cuts can think strategically about where the business will be and how they might build for the future.”
Surviving the next 18 months requires an honest review of how a small and mediumsized enterprise (SME) does business, and even what the business will look like moving forward, she adds.
How Do I Survive?
“Successful SME owners, ie those who are intent on getting through this, will be doing what perhaps all leaders should be doing, and that’s taking a long look in the mirror and asking, ‘How do I and my venture adapt, survive and thrive in the new reality?’” The answer to this and related questions in many cases will identify opportunities for the business. Bolger suggests that business owners ask themselves:
- What am I and my business known for in the industry?
- Does that still have value in light of the current economic climate?
- Has my ideal customer changed? Has what my customers require changed?
- Do my customers seek more information in different places than they did 12 months ago?
- Does my pricing structure meet the needs of my customer or do I need to offer options and alternative payment plans?
- How have I marketed my business? Is that still an effective vehicle?
- Have I embraced social media? How can social media help my business?
- Are there products and services that I offer that no longer make sense?
- Is there a different line of products or services that will more effectively meet my customers needs?
- What help do I need? What training? What mentoring and networking help can I get?
- Who can I partner with to provide more value to my customers? Do I need to invest further in key relationships, such as with customers, suppliers, my bank?
Do I have a cashflow forecast in place?
Have I checked my “business health” with the following
- Late payments
If my goal is to not only to be in business 12 months from now, but to be a thriving, growing business, what one thing do I need to change today to make that happen? It’s this process, happening in thousands of small businesses across the country, which should drive new innovation and see the SME sector soar and ultimately help lead the country out of recession with job and wealth creation, Bolger says.
“This questioning clarifies business goals and leads many a business owner to re-evaluate and embrace new ways of doing business. However the fundamentals of doing business - winning and looking after customers - have not changed.” It is critical to understand customers’ needs and adapt and innovate accordingly. SMEs must take advantage of the fact that they can get close to their customers and so understand and serve them better. The general experience is that the economic crisis has led to a shift in customer service methodology - where businesses must actually prove their value as opposed to just telling customers and prospects about it.
Also, protecting your business has become crucial to ensuring survival and furthering growth, notes Bolger. “This can be achieved through diversification - spreading yourself where possible so that a bad debt from one customer does not lead to the demise of the business. Part of the problem is that eight in 10 small businesses have all their customers within a 50-mile radius. Try to avoid putting all your eggs in one basket - if this is outside your control highlight it as a potential weakness,” she says.
“Being careful of who you do business with is also important. A sale is not a sale until the money is in the bank. Credit checks are vital for all customers - despite how long you have been doing business with them.” You can also be creative with payment terms - consider cash on delivery (if you think there is a risk of nonpayment) or ask for staged payments - these can help cover your costs as you go.
Also, make sure your terms and conditions are clearly written so that customers know that prompt payment is expected. Consider the benefits of early cash. An invoice finance facility allows you to receive payments when you raise an invoice, giving you immediate cash to fund and grow your business. It may not have been the traditional way of funding your business to date but in a new competitive climate it could be just what you need. Don’t let debt get out of hand by setting credit limits for each customer separately.. Make sure you have procedures in place for the automatic following up and flagging of invoices. “Find out the reason for late payment, for example, a problem with the product or service or an error on the invoice and let your bank know as soon as you recognise bad debt causing issues for either the profitability or cash flow of your business.”
(Part 2 coming next week at smallbusinesscan.com)