In a tough economic environment, small businesses may be forced to cut costs in order to remain viable.
A significant cost for many small businesses is labour, so this is an area commonly targeted.
The business owner then goes back to producing the goods / services the business provides, be it a baker baking bread or a landscaper mowing the lawns. This is commonly referred to as “working in the business”.
This strategy may result in the small business owner working harder, however not necessarily improving the viability of the business. Is this the best use of your time and effort? What else could you be working on to ensure the viability of the business?
Work on the Business!
“Working on the business” means working on the strategies, systems and procedures which allow the business to operate profitably and grow. Working on the business can make a huge difference to the viability and growth of the business. So what are the key things you should be working on?
Business Plan and Strategy
Do you have a Business Plan? Do you have a documented strategy? If you do, when was the last time you reviewed it? In a tough economic environment, your business plan and strategy is even more important. Your strategy sets out what differentiates you from your competitors. Remember, in a tough economic environment, your competitors are under the same pressure as you. In RSM’s recently released thinkBIG 2017 study which is a survey of SME sentiment and outcomes, now in its 12th year, it was confirmed that your Business Plan and Strategy need not be complicated, lengthy documents. They should capture the key strategies and actions you need to implement for your business.
So if you don’t have a Business Plan and Strategy, now is the time to prepare one.
If you do have a Business Plan and Strategy but it’s been a while since you reviewed it, get it out and update it!
Understand your Financial Statements
Traditionally, many small business owners have prepared financial statements simply in order to prepare income tax returns. However, up to date, accurate financial statements are a powerful management tool often not fully utilised by small business owners. They can tell you important information such as where your profit and cash is generated and spent. Learn how to read your financial statements and invest in systems that enable you to access up to date financial information. This will enable you to make informed decisions about your business.
Networking and Marketing
Networking and marketing are crucial activities for small business owners. Networking and marketing need not be expensive, but should be targeted where the best return can be generated. Develop networking and marketing strategies and incorporate these in your business plan.
Budgeting and Financial Reporting
Once you have a current Business Strategy and Plan and understand your financial statements, you can set a meaningful budget, incorporating your strategies. A budget should be set for at least twelve months and reviewed regularly as conditions change. Compare your actual financial performance against the budget. This will enable you to see if the measures you are implementing are working.
Unlock your business information
Whilst working harder is a common reaction by small business owners in a tough economic environment, it is important to focus your efforts where the best outcomes for the business can be achieved. Working on the business, by implementing the strategies outlined above is especially important in such an environment.