When you’re running a business, it can be tough to deal with unforeseen circumstances — and we’ve had our fair share recently, from global health crises to elections to social unrest and a fast changing business landscape.
We’ve outlined five tactics to help you plan ahead when the ground beneath you is constantly shifting.
1: Identify your business drivers and establish red flags
While sales revenue is often the best indicator of how well your business is performing, other drivers can paint a clearer picture. Here are some other things to look out for next year:
- Acquisition (fewer calls, queries, demos, meetings booked, foot traffic)
- Retention (customers switching to competitors)
- Average sale (cheaper competitors and discounts)
- Gross profit (increase in costs or selling lower-margin items)
- Web traffic and leads (distracted customers)
- Conversion (fewer leads become customers)
- Accounts receivable (customers paying late)
- Staff morale (staff turnover, increase in sick leave)
- Social media participation (less relevance)
Choose which business drivers you want to monitor, set thresholds to trigger warnings and then take action to improve them as soon as they deteriorate past your predetermined threshold. Other, more drastic cash saving measures might be needed. It may be time to scale back and remove the low profit-making parts of your business, or you could close certain locations, branches, offices or product lines to save that extra bit of money.
2: Create a cash buffer
If sales fall while expenses increase, your profitability could be in danger. Having a cash reserve buys you more time to fix what needs fixing. The best source of capital is what you can save internally. Most businesses can squeeze extra cash by tightening their tactics, becoming more efficient, or altering how they do business, including:
- Reducing the level of raw materials or inventory (use ‘just in time’ principles)
- Clearing old or surplus stock (without re-ordering)
- Selling unused or infrequently-used assets (lease back if needed)
- Renegotiating lower prices with all suppliers (don’t compromise on quality)
- Collaborating with other businesses (to share resources)
- Discounting outstanding customer invoices (or using a factoring company)
- Conducting regular inventory audits to identify wastage
- Asking suppliers if you can delay payments or pay in instalments
- Requesting deposits or progress payments in advance
- Switching from offering credit to immediate payments
- Reducing fraud and theft
3: Find new customers and diversify
You’ll most likely have to look for new customers at some stage. This might be because of new competition, slowing demand, new business models, or changing customer needs.
There could be a number of new customers hidden in your existing market. Profile your ideal customer: their demographics, the problem they want solved, where they spend their time, how they prefer to communicate with you and for business customers, and their buying cycles. Then:
- Target customers with similar needs to your existing profile
- Find leads within your existing networks
- Add content that solves customer pain points
- Optimize your website with keywords for search engines
One way to be more effective in finding new customers is by tracking what marketing tactics worked. Don’t forget to ask for referrals — your customers are likely to know other people just like them, and are often willing to vouch for your business. If you want to explore new ways of finding new customers, considerwidening your business model.This might include:
- Expanding into different geographical locations, or franchising
- Selling online
- Collaborating with other businesses
- Applying for government tenders
- Buying competitors or complementary businesses looking to sell
- Offering your product or service to other businesses to on-sell
- Exploring overseas markets
- Selling through third-party marketplaces
Any tactic that gets you in front of a new customer or opportunity will be worthwhile..
4: Protecting what you have
Existing customers tend to be more profitable and easier to sell to than trying to find new ones. It makes sense, therefore, to safeguard your current client base from possible competitor action. See if you can:
- Source unique products or services
- Contract an exclusive trading area
- Ask suppliers to sell exclusively to your business
- Become the only approved vendor
- Set up formal referral agreements within your industry
- Build a well-known brand
- Top search rankings
If there are parts of your business that are critical to your success, consider legally protecting them and taking action if anyone breaches your rights. Your IP includes copyright, patents, designs, trademarks, trade secrets and plant variety rights.
5: Ongoing innovation
Businesses that stand the test of time are constantly evolving and changing. For smaller businesses, the key to innovation comes down to listening to customers and looking for new ideas and ways to do business.
Whether you’re a baker, plumber, builder or corporate professional, there are always ways to add something new to your skillset. The internet, apps, growth of online shopping and banking have changed the playing field.
If you need to find new products and services, a typical process would be to develop a prototype, research if there’s demand, test it with customers and then launch.
You should also check that you can sell your new product at the price or volume necessary to make a profit, and protect any intellectual property you’ve created to limit competition. Even better, you could involve customers in the design phase where and when needed.
To discover new ideas, tap into what similar businesses are doing right now around the world. Read up on trends, look at research papers and see what’s impacting your line of work. Social media channels are also a useful source of information, so it’s worth following relevant feeds.
Finally, reach out to your customers and ask them what else they need, as well as their issues and problems you can help to solve. They’ll also be the ones with the most vested interest in your new ideas.
The Stuff We Need To Say
This content is for general information purposes only. It is not to be relied upon as financial, tax, or investment advice or guarantees about the future, nor should it be considered a recommendation to buy or sell. You should consult your own professional advisor for specific financial, investment, and/or tax advice tailored to your needs to ensure that individual circumstances are considered properly and action is taken based on the latest available information.
