Running a successful business can be challenging, with half of all small businesses failing within the first three years. However, understanding common pitfalls and knowing how to navigate them can significantly boost your small business’s chances of success.
Here’s a straightforward guide to help your business thrive.
1. Know Your Competitors
One major reason small businesses struggle is competition from larger companies. These businesses often have the advantage of lower costs and prices due to their buying power.
How to Combat This:
- Research: Understand who your competitors are and what they offer.
- Leverage Your Strengths: Offer what they can’t, such as things like:
- Local produce from local suppliers
- Personal customer service
- Special order items for unique customer needs
- A local delivery service
2. Boost Sales
A lack of sales is a common issue for new businesses and when launching new products or services.
How to Increase Sales:
- Market Research: Learn about your target market to set appropriate prices and products.
- Diverse Customer Base: Avoid relying on a few key customers. Spread your risk by having a varied customer base.
- Stay Current: Keep up with technological advancements to avoid falling behind competitors.
3. Manage Cash Flow
Poor cash flow can be detrimental. Many business owners are experts in their field but may lack financial management experience.
Improving Cash Flow:
- Stock Management: Avoid overstocking, especially with slow-moving items.
- Credit Control: Implement strict credit policies to ensure timely payments.
- Credit Checks: Conduct credit checks on new customers before offering credit terms.
4. Monitor Performance
Failing to regularly review business performance can lead to overlooked problems.
Effective Monitoring:
- Regular Reviews: Prepare management accounts periodically and compare them against previous years and expected results.
- Budgeting: Create a detailed budget, including all costs to ensure pricing covers both direct costs and overheads.
5. Focus on Profit, Not Just Turnover
Focusing solely on sales can be misleading.
Profit-Focused Strategy:
- Cost Control: Monitor and control business costs to improve profitability.
- Comprehensive Planning: Prepare a business plan including a profit and loss forecast to anticipate all potential expenses.
6. Financial Control
Taking excessive funds out of the business can be risky.
Financial Discipline:
- Moderate Drawings: In tough times, reduce personal drawings to help the business stabilise.
- Sustainable Income: Aim for steady, long-term income rather than short-term gains.
7. Taxation
Meeting tax obligations on time is crucial. The Business Payments Support Service from HMRC can help negotiate ‘time to pay arrangements’ if needed.
8. Develop Management Skills
Effective management is key to business success.
Building Skills:
- Training: Invest in management training to improve long-term planning and staff management.
- Succession Planning: Have a plan for key roles to ensure continuity in case of absences or departures.
9. Compliance with Legislation
Stay compliant with employment, health, safety, and environmental laws to avoid costly penalties.
Legislative Compliance:
- Expert Help: Use government resources like Acas for employment advice and consider consultants for high-risk areas.
10. Choose the Right Location
Location can significantly impact customer accessibility and business visibility.
Location Strategy:
- Accessibility: Ensure your business is in a location that is convenient for customers and has good visibility.
11. Prepare a Business Plan
A well-prepared business plan is essential for securing finance and guiding your business.
Business Planning:
- Forecasting: Include financial projections and market research to back up your sales figures.
- Strategic Direction: Use the plan to monitor actual results against expected performance.
When Things Go Wrong
Facing business difficulties early can make recovery easier.
Taking Action:
- Seek Help: Don’t hesitate to get professional advice if your business is struggling.
How Can Blue Spire Help
At Blue Spire, we provide the support and expertise needed to navigate these challenges for Small Business owners.
From preparing management accounts and cashflow forecasts to offering remedial action if things go wrong, we are here to help you succeed.
| Contact us today to ensure your business has the right mix of skills and support to thrive. |
