Step 1: Have a business strategy
If you want to build and run a successful small business, it is critical that you are prepared. While it is impossible to know exactly what the future will bring, having a business strategy will ensure you stay on track and focused throughout the years.
Of course, writing a business plan can be easier said than done. As any small business owner with a planned strategy will testify, building a business plan isn’t a task you should undertake lightly. When writing a successful small business plan, you need to do the following:
- Do your research: What market headwinds and tailwinds do you think the business will face in the first year? What are some of the hurdles that other (similar) businesses have faced? How will you overcome these hurdles? What marketing and financing strategies will you put in place to safeguard against all economic and business headwinds?
- Actual vs expected figures: Have you bought an existing business or are you launching the business from scratch? If you have bought an existing business, include the actual financials in your planning. If you are starting from scratch, it is critical that you identify what you believe the business will make in its first year of operation. Be reasonable – you cannot expect the business to be a runaway success overnight.
- Plan your marketing: A business will struggle to gain momentum if no-one has ever heard of it. Plan out how you will market the business and how much your marketing strategies may cost to implement. When starting out, you won’t have a significant amount of capital to invest in marketing, so make sure you are clever with your money and invest in activities that have a proven strong return on investment.
- Get help: If you are struggling to build a business strategy, look for help. If you have bought into an existing franchise business, make sure you ask head office for help and support building your strategy. If you are opening an independent small business, speak to friends, family and other small business owners for their advice.
- Constantly review: If you are going to go to the trouble of building out a business plan, it is critical that you don’t take a set and forget attitude towards the plan. Review your strategy frequently and see how your actual results compare with your expected outcomes. If you aren’t getting the results you want, don’t fret. Review your strategy, refresh your plans and, if needed, realign your goals. The fact is, when it comes to running a small business, it is not always going to be smooth sailing. Outside factors can and will affect your business performance, so make sure you take that into consideration when reviewing your business. The key is to be honest with yourself and be comfortable adjusting your plans when required.
Step 2: Manage your cash flow
To run a successful small business, it is imperative that you effectively manage your cash flow. As the old adage goes: even profitable businesses can go bust if they run out of cash.
While profit should be a goal for every small business, your number one priority has to be cash flow. Pure and simple. After all, no cash flow, no business.
Thankfully, there are a few things all small business owners can do to ensure they successfully manage their cash flow, including:
- Understand your working capital: Knowing how much money your business needs in order to run is critical. It is also important that you keep an eye on all the money coming into and going out of your business. How far behind are you on invoicing? How much money are you owed from outstanding invoices? How much money is tied up in ‘work in progress’? How much stock do you have that is waiting to be bought? All of these things and more will dry up your cash flow quicker than you can blink, so it is critical that you stay abreast of it all.
- Have cash to work: Even if you are owed money from clients, you still need to have enough cash to fund your working capital needs. Where possible, have a financial buffer in place – whether this is in the form of an overdraft, or simply money you have saved in the bank – it is important to keep money aside for rainy day expenses.
- Plan ahead: Some businesses are very seasonal. If yours is a seasonal business, it is good to plan ahead. By planning ahead, you can make sure you have enough cash flow to get you through the quieter times.
- Make it easy for customers to pay: Where possible, it is a good idea to make it as easy as possible for customers to pay you quickly. The easier it is for them to pay, the faster you will receive their money, and the sooner you will be in the black with access to cash.
- Cut costs where possible: While you don’t want to burn the furniture in order to stay profitable, you also don’t want to spend money frivolously. Review your business expenses on an ongoing basis and pinpoint areas where you may be able to cut back.
Step 3: Differentiate yourself from your competitors
If you want your business to be successful, it is important that you have a clear point of difference. Is your pricing better? Do you offer a better customer service experience? What do you do better than anyone else? If you can clearly articulate/show your point of difference with your customers, this should help you to generate more word of mouth business opportunities.
Step 4: Hire the right staff
If you need people to help your business run, you have to ensure you choose wisely. Don’t hire an employee based on their skill-set alone. Consider their attitude, their keenness to work, and whether or not they will fit into the business culture you have established. Your staff are not just representing your company, they are representing you, so you have to select the right person for the job.
Step 5: Set short and long-term goals
While it is nice to have ambitious 5 or 10-year goals in place, it is critical that you set yourself and your business short-term goals too. Long-term goals will help keep you focused and on track, while short-term goals will help keep you motivated and will highlight whether your business is performing in line with your expectations.
Step 6: Review, Review, Review
Review your business, your performance, your staff, your expenses and your goals at least every year. Are you heading in the right direction? Be true to yourself, if something isn’t working, identify how you may be able to rectify the issue. A regular and critical review of your business is essential if you want to be successful.
Step 7: Work hard and good luck!
If you want more small business tips and/or would like help with any of your small business finance needs, make sure you speak to Mortgage Choice today.
Not only have we been helping Australians realise their finance goals for more than 25 years, but we are also small business owners too. As such, we know what it takes to successfully run a small business and the financing support you will need throughout your journey.
With access to 10 small business specialist lenders, we have a broad range of products and services at our fingertips. Moreover, we understand the policies and pricing of each lender intimately and, as such, are well positioned to help you find the ideal loan solution/s for your small business needs.
At Mortgage Choice, we are more than just your local mortgage broker. We are a fully-fledged financial services hub that can assist you with all of your business lending, financial planning and equipment finance needs.
Don’t try and go it alone. Speak to us today and let us help you with all of your small business needs.