A building in an earthquake area is engineered to withstand tremors. A bridge is designed to bear the weight of traffic and resist the pressures of sun, rain and rust. And a business? It needs to stand up to the stress of fickle, price-sensitive customers, fast-moving competitors, an unpredictable economy, fluctuating exchange rates, changing technologies and a host of other factors.
Fortunately, there are plenty of things you can do to bolster your business and save you from unnecessary stress.
Manage your cash flows carefully.
Most new small businesses fail within the first two years, and it is well documented that most of the failures are due to cash flow problems. Even if the crunch is only temporary, a cash flow shortfall can bring creditors knocking at the door and send employees running for it. What can you do?
• Get your debtors to pay sooner. Consider offering discounts for early payment, but be sure that the discounts aren’t worth more than the “time value” of your money – that is, the interest or other return you could earn if you kept it as cash in the bank or put it to work in the business.
• Charge penalty interest on late payments, and chase bad debts assertively. Delay your own payments to creditors where possible – but don’t damage your relationships. You need to be on good terms with your suppliers so you can ask for their patience until the needle swings back your way.
• Take advantage of credit offered by suppliers. Then use a corporate credit card to buy even more time – as well as pick up handy points and rewards.
• Get a merchant account yourself and accept payments by credit card. It will cost you a bit in fees, but payments are secure and almost immediate.
• Don’t give credit to everyone who asks. Put them on cash terms for the first few transactions while you do a credit check through one or more of Australia’s Credit Reporting Bodies – Dunn & Bradstreet, Experian and Veda.
• If an important customer is consistently a slow payer, don’t cut off supply completely (unless absolutely necessary) but ask for cash for a while to rebuild confidence.
• On very big or unusual orders, ask for deposits and progress payments so you’re not out of pocket if the customer changes their mind.
• If you’re in a highly seasonal business, like summer fashion, find something complementary, like winter ski apparel, to get you through the low period. Consider using a cash flow solution like invoice finance or factoring to help provide strong cash flow during these periods.
Stay ahead of the competition.
Out of the blue comes the competitor you knew would come. How do you respond?
• Know your “unique selling point”, the point of difference that sets you apart from the rest of the market. It might be your speed, product range, responsiveness – or anything else your customers value.
• Be true to yourself and don’t just try to fight the competition on their terms. For instance, don’t throw away your reputation for quality by trying to match them on price. You may want to introduce a new, lower-priced range, but don’t let it endanger your core business.
• Nurture relationships to retain core customers. Maybe they’ve done you a few good turns over the years. Now it’s your turn to return the favour.
Invest in good staff and learn to delegate.
Your staff are a major asset to the business so it is important you invest in them via training and development opportunities to retain them. All staff progress through a development curve, so the longer they are with the business the more productive they can be. Conversely, newer staff can take up valuable time in training so to ensure you remain focused on the right things, it does pay to surround yourself with the right staff who love what they do and are in it for the long haul.
Finally, learn to delegate. It is not easy, and involves a lot of trust but if you feel staff are competent and trustworthy, take the opportunity to expand and enrich their role with added responsibility. Hopefully they will respond in the right way and free up the time and energy for you to focus on the right things and not stress over the wrong things. Of course, in high stress situations for the business because you have invested in staff you will have a committed team ready and willing to help you get through it to the other side.
Don’t over-expand or overcommit.
Many promising business' have failed because the principals got too eager and grew it too fast. Don’t let that be you.
• Draw up a realistic business plan and review it regularly. When an exciting opportunity presents itself, measure it against your plan and try to think of all the reasons why you should not proceed. Only go ahead if the numbers tell you it’s worth the risk.
• Know what you personally are good at, which is probably the passion that took you into business in the first place. Then carefully hire the right people to do the things you can’t, but always stay on top of the essentials. Don’t spread yourself so thin you don’t know what’s going on further down the ranks.
You can’t avoid the storms in corporate life, but if you strengthen your business in advance you’ll have every chance of sailing through them.
