A healthy small business sector is an essential part of a prosperous economy. To become part of that economy, companies have to sustain growth - which can be easier said than done.
There are no guarantees for success in business, but learning from the winning and losing ways of others is a good starter. Here are some points to note.
Do your homework
- Is there a market for your product?
- Do people want your product in sufficient quantities?
A Fortune survey found that 42% of start-ups fail because there's no market for their product. Listening to and understanding your market is vital. Before you even start out, do your homework and be realistic about the results. Find out if people really do want what you've got - or if you really can persuade them that they need it - and in sufficient quantities that you can sustain your business.
Manage the 'everyday'
- Keep a clear eye on the big picture
- Do you have someone in the team to keep everything running smoothly?
If people in your company are focused on their own roles and no one is holding down the day-to-day running of the company, it will unravel pretty quickly. Often in an office, there is one person who is said to keep everything running smoothly and without whom chaos would reign. Every business needs someone like this. In a small business, roles and responsibilities will often overlap to cover the 'everyday' things. There is no room for the 'it's not my job' mentality.
Don't let running the business ruin your business
- Consider outsourcing some business processes
- Don't lose sight of why you started the business
When you spend so many hours running your business - doing all the admin and accounts and other non-core activities - the real reason you started it can get lost. If you don't progress, though, you will fail. Can you automate or outsource some of the business processes or get help on an ad hoc basis? Can you find the ultimate office saviour?
Form a clear marketing plan
- Be clear on targets, messages and channels
- Spark interest and then sell
Even the greatest product will amount to nothing if no one knows about it. A marketing plan and budget is essential. Don't adopt the scatter-gun model and hope something will stick. Be precise with your targets, messages and channels. Learn about marketing methods and use them. The aim is to lure customers then sell to them: sales and marketing are not the same thing!
Manage the metrics
- Look forward as well as back when considering financials
- Don't just focus on the bottom line
Growth gives greater access to funding, which allows more growth. More growth helps make a business competitive and sustainable, but strong and rapid growth makes managing your financials harder. Don't just look at the bottom line: use a wide range of metrics to understand where you are positioned at any given point. Don't just take the accountant's backward-looking view of your money - take the treasurer's forward-looking view, too, so you can optimise the management of your cash and liquidity.
Plan to meet customer demand
- Ensure you can maintain quality of service and delivery
- Be prepared to plan ahead
If growth is rapid, the capacity to deliver and the quality of your products or services can suffer, possibly damaging your reputation. It is always easier to retain existing customers and derive additional revenue from them than it is to bring in new customers. Planning resources to meet demand growth - and contraction - is vital for sustainable business.
Think cash flow
- Be firm with customers
- Orders are good but don't forget cash
Running out of cash is just a symptom of neglect in some other aspect. Failure to plan cash flow efficiently is a common error. For high-growth businesses, selling on credit is tempting. If you can't collect your receivables quickly enough, though, you might not be able to meet your own payables on time. You may have plenty of orders but with no cash coming in you are at risk. A firm approach to cash collection is essential for sustainable business.