As a small business owner myself, I fully understand the challenges of running a business and I also appreciate the importance of bringing in support from other experts to help me to ensure business viability and to enable growth.
As a Chartered Management Accountant and profit expert, I’m always keen to share some of the pitfalls that businesses can face and offer some ideas that would help.
Lack of Planning
Lack of planning is one of the main reasons that businesses fail. I’m a big believer in the saying that ‘failing to plan is planning to fail’. We all have personal reasons for running a business and one of the big reasons is to do what we enjoy and what we’re good at on our own terms.
Unfortunately, running a business involves lots of things that we don’t enjoy doing which can be overwhelming. All too often these things fall low on the priority list. I work with my clients on their evolving business plans that we review and adapt regularly. A plan should include everything from your target audience and marketing, through to pricing, sales forecasts and any barriers that you may face within the next 12 months. Nobody foresaw the global pandemic but businesses with detailed plans were able to adapt and evolve much quicker than those that didn’t as they had a deep understanding of every part of their business.
Not Enough Sales & Ineffective Marketing
According to research by Statista, 79% of UK SMEs stated that their toughest challenge was attracting new customers. I’m not a marketeer (but I know people who are),so I can’t claim to have the big ideas to generate new business but what I do do, which is equally important, is to look at where the business is spending money to generate sales, alongside corresponding return on investment. It’s often the case that businesses spend lots of money on elements of marketing that they think they should be doing, but when we do the maths they’re not actually generating any tangible return on investment. And in other cases, the business isn’t committing enough budget to the things that really are working.
Inconsistent Cashflow and Unforeseen Expenditure
Cash flow is the life blood of any business. You could have lots of clients spending lots of money but if the incomings and outgoings aren’t managed alongside each other, you could get into real trouble. I’m very passionate about working with businesses to manage their cashflow because it can often be the greatest stress for business owners but it can also be one of the easiest things to fix with time and commitment. From reviewing payment terms and pricing, through to rationalising the cost base and streamlining processes, I ensure that my clients have financially viable businesses that have the capacity to cope with financial curveballs.
Cash is essential for keeping your business afloat, but if you’re just living within your means every month, you’re unlikely to be able to invest in the things that will support you in your growth journey. Whether that’s machinery to increase productivity, people to increase productivity or marketing to increase sales. I work with my clients to release capital that already exists within the business, even if it’s well hidden. I also support them in sourcing external funding, whether that be in the form of a development grant or business loan. As well as completing the application processes, I also go through the due diligence processes that ensure that it’s the right move for the business.
Recruiting and Retaining Good Staff
Recruiting and retaining good staff is imperative as they are the public face of your business. Studies show that the cost of replacing an employee can be as much as 6-9 months salary. To find the right people and retain them, I work with my clients to set salary bands that are reflective of the industry and the calibre of people that they’re trying to find. Alongside this, I work with them to build incentives and targets, which are aligned to the business goals, to reward the commitment of their team and keep them motivated.
Profit is your reward, as a business owner, for the risks you’ve taken in starting a business and for all the hard slog you put in. Low profitability comes from either high running costs or low sales or, most commonly, a combination of the two. The underlying reasons for high costs / low sales can, however, be tricky to spot. I get my magnifying glass out and go through every part of the business in detail to find the problem areas and support my clients to take the necessary steps to address them. I also hunt down gaps and opportunities for increasing profitability. One example is for businesses that have historically imported from Europe and other parts of the world. Initially the costs may have been more competitive, but with the changes in legislation and taxes etc. it may now be more cost effective and less stressful to source locally. The key is to identify problems quickly before they get out of hand.
Book a curiosity call with me to find out how we can work together to navigate these pitfalls and move your business closer to where you want to take it.