Operating a small to medium enterprise (SME) is a challenging task, even when the economy is doing well. According to data from the Australian Bureau of Statistics, over 60 per cent of small businesses stop their operations within three years, with a far higher number failing to last the length of a typical economic cycle. The reasons for this are many, although any SME owner will tell you the same thing – it’s a constant struggle to manage all the different elements involved in running a business. You have to manage staff, sales, marketing, customers while mitigating risk and staying on top of your cash flow.
When times inevitably get tough, SMEs owners that haven’t laid the right groundwork are exposed very quickly. The recent COVID-19 experience has brought to the surface how vulnerable many businesses are to short-term restrictions and societal behaviour changes. The SMEs that survive these difficult times all have a plan in place to stabilise their operations, pivot and possibly even grow their business. Here are six strategies to help you do the same.
Minimise Unnecessary Expenses
Your business can only last so long if costs are outpacing revenues. Profitable trading is necessary for ongoing survival. If sales are dropping, your expenses need to come down as well to balance the books. Cutting costs isn’t an exact science, although applying due care and precision is imperative. Too aggressive and you may damage your operations, making it very difficult to recover as customers move to competitors. Too conservative and you won’t produce sufficient savings to keep your SME sufficiently liquid.
Take a hard view of your expenses on a line-by-line basis; anything that is not critical can go. Business lunches, travel costs, media subscriptions and certain types of advertising are typical examples of discretionary expenses that can be eliminated or significantly reduced immediately to stabilise your business. Consider alternatives, are you able to switch to coffee meetings and video conferencing?
Improve Your Marketing
Downturns are often opportunities to improve your marketing messages and form a connection with your customers. Competitors may eliminate their advertising costs to a bare minimum, giving you a runway to appeal to potential customers. Good marketing drives sales so cutting it may be a death sentence to your top line, exacerbating the difficulties you’re already facing.
Consider shifting your advertising spend online to maximise your return on investment. Your marketing should focus on driving sales by connecting with your customer’s needs during trying situations. For example, If you’re a restaurant that can’t accommodate dine-in customers throughout COVID-19, promote your takeaway deals instead.
Reward Existing Customers and Deepen Loyalty
One of the essential costs every business needs to optimise is the price paid to acquire a new customer. When times are tough, it can be harder than ever to attract new patrons, so focus on keeping the loyal customers you already have. The primary driver of customer loyalty is the level of service they receive from your business. Make them feel special!
Show your customer’s you care by communicating with them in creative ways. Feature them on social media, provide free value to them by creating and distributing weekly content and insights or offer specials to celebrate meaningful days in their lives, such as birthdays and anniversaries.
Collaborate and Try New Business Partnerships
When everything is going great, business competition is fair game. When times get difficult, you may notice a sense of community, as people and businesses come together to make it through the other side. Collaborations can give you access to new products, markets and customers, benefiting both entities involved. How can you work with a competitor to increase both your sales? Perhaps you can collaborate with an entirely different industry to bundle complementary products and services for your customers. Get creative!
Don’t be Afraid of Growth
Many leading companies were formed during difficult times. For example, WhatsApp, Uber and Venmo started during the GFC, and entertainment juggernaut Disney was first introduced to the world at the start of the Great Depression. Just because the current situation looks complicated, there will always be opportunities to try new things. Once you have the basics of your business stabilised, take smart risks and have a go at something fresh. Where one service or goods line declines, another may flourish – never be afraid to pivot.
Manage Your Cash Flow with Invoice Finance
Use tools to optimise your working capital position and improve your ability to respond to external threats. Invoice finance is a fantastic funding option used to shorten your cash conversion cycle and improve your financial situation. Eliminate the costs of high cost non-bank business loans, payment plans and credit cards by instead accessing your cash sooner from unpaid invoices. Invoice financiers will advance up to 90% of your verified outstanding invoices upfront. When your customer pays and the funds are received by your invoice finance provider, they’ll remit the remaining 10% minus a small fee to compensate for early funding. Think of it as giving an early settlement discount. There is not ongoing interest fees, like a loan. You only pay for what you use.
Don’t let a drop off in customers or challenging trading conditions hold your business back, tackle tough times by unlocking tomorrow’s cash flow today with TIM Finance.