It's 2016, and small-business leaders will be dusting off their crystal balls and peering into them to try and get some insight and competitive advantage. While their success may be limited, there are plenty of other things they can think about to sustainably grow their businesses over the next calendar year.
The key word here is sustainability. When small businesses develop too quickly, they can soon encounter the growing pains and capital restraints that commonly cut them down to size. For any small business, building up your finances, your assets and your success is a sure-fire way to build market position and grow into a bigger enterprise.
So, while that crystal ball warms up, let's have a look at three focus points for small businesses hoping to grow effectively.
When small businesses develop too quickly, they can soon encounter the growing pains and capital restraints that commonly cut them down to size.
1) Get your cash flow under control
Cash flow is the biggest reason why businesses of all sizes either succeed or fail. For those on the smaller side - those with a modest capital safety net - the consequences of poor cash management are often much more critical.
According to the Australian Securities and Investment Commission's latest report on business insolvency, "inadequate cash flow or high cash use" is the top cause of business failure in Australia. The issue is so recurrent that it has taken second spot for the two years prior, before leaping into the lead in recent times.
Business owners should forecast their income-making potential as accurately as possible, balancing it with their ongoing expenditures. With a strong cash flow report, they should be able to plan well in advance for any large capital outlays that can enable growth but would otherwise be financially crippling.
When a healthy cash injection is needed, debtor finance can be used to boost the books quickly, sustainably and without taking on more debt.
2) Stay flat when possible
Small businesses can soon become tangled in a web of bureaucracy. While a wide and convoluted management structure may work for billion-dollar multinational corporates, it will only slow things down for a smaller firm.
Russ Fujioka, US President at innovative accounting software company Xero, said a flat sales structure can get the best out of the team, while keeping operations small, flexible and accountable.
"Small businesses need to avoid unnecessary hierarchy. If there are fewer than 10 people selling, it's best to have one person with direct oversight. This might be the business owner or whoever they've empowered to oversee sales. They need to have their eye on the salespeople and the sales process on a day-to-day basis," he explained.
"As your business scales up, don't introduce a reporting hierarchy too soon. It's more important to divide your sales team based on areas of specific expertise than by who they report to."
The same can be said of different departments in the average small business. Grow slowly without losing the ability to operate quickly - something your large competitors could only dream about.
When a healthy cash injection is needed, debtor finance can be used to boost the books quickly, sustainably and without taking on more debt.
3) Review strategy more regularly
The days of the annual strategy review are coming to an end. In the diverse and highly changeable modern business environment, strategies need to be more fluid and ready to adapt.
The road you started on even at the beginning of the year may be proving a good one, or it might be rockier than you first thought. Fortunately for a small business vessel, making a manoeuvre is not as difficult as their larger counterparts.
Review your strategy more often. For instance, if the Australian dollar hits troubled waters again, you may want to concentrate on local markets a little more, where there are greater profit margins. Whatever happens, also make strategic changes that don't plug up your cash-flow pipelines. Be prepared by getting to know your small-business finance solutions and how they can be used to keep your business boat moving and expanding.
Earlypay has supported Australian SMEs with fast and flexible alternative funding solutions for more than 20 years. Our invoice finance and asset finance products allow business owners to proactively manage their cash flow, freeing up their working capital for investing in growth. To chat about whether our solutions could be right for your business, please call us on 1300 760 205.
If you'd like to learn how Earlypay's Invoice Finance & Equipment Finance can help you boost your working capital to fund growth or keep on top of day-to-day operations of your business, contact Earlypay's helpful team today on 1300 760 205, visit our sign-up form or contact [email protected].