Could your business survive economic insecurity?
According to research by the Royal Society for the encouragement of Arts, Manufactures and Commerce (RSA), 29% of self-employed workers would struggle to pay a bill of £100 or more, and 25% are concerned that they will experience a period of unemployment in the next two years. Economic insecurity can be a real challenge for small businesses, so how can you make sure your business is prepared?
It’s not just self-employed workers who are potentially unprepared. The research also found that 45% of workers don’t have enough saved for retirement, 32% are concerned about the level of debt they have, and 59% would struggle to pay an unexpected bill of £500.
If you couple this with potential economic fluctuations, less business coming in or a change in trading terms that could be introduced by Brexit, it is easy to see how unstable a business model could become.
Diversify and grow your customer base
Would your business struggle if you lost your biggest client tomorrow? Don’t forget in economically challenging times, it’s not just your business that may feel the effect.
Other businesses that you sell your services to or supply your company may struggle, and you could lose a significant income if a client decides to cut back and not use your services or their business closes.
If you provide products for the general public, you may also find that sales decline as people become more money-conscious.
Take time to spread the potential risk by growing your customer base and possibly taking on additional clients so that you won’t feel the loss of one individual so heavily.
If it’s not possible to take on additional clients, in the case of many sole traders, then create a plan of what you would do to mitigate the risk if the worst were to happen suddenly.
Get your finances in order
Getting your business finances in order and managing your cash flow is crucial in economically volatile times.
Ensure that the figures are up to date and you have relevant KPI’s and other reporting mechanisms in place to provide early alerts to any issues that are building. You should be reviewing your finances regularly so that you can tackle problems head-on before they become too severe and threaten the viability of your business.
This blog post on the 8 financial figures all business owners should know is an excellent place to start.
Identify the risks
Have you actually looked at all the risks your business may face in the future and whether it could survive?
Identify different crisis scenarios and put contingency plans in place now. What would happen if your sales suddenly fell significantly? What if you lost a key person in the company? A natural disaster meant that your employees could not get to work?
Implement a risk register that has precise mitigations attached for each scenario. Disaster planning may seem extreme; however, those businesses that prepare for the unexpected are more likely to survive economic instability than those who ignore the potential threats to their company.
Never stop marketing, especially when things are going well. Time and money can mean that this core area of your business gets pushed to one side or is a victim of budget cuts.
However, if you don’t market, how will customers know you are still there? Just at a time when you may need more sales, you have stopped selling.
It takes time to build up marketing momentum, and that’s luxury you may not have if your main client walks out the door tomorrow.
If you do have fewer funds to allocate to marketing, then consider what tools you can utilise at a low cost such as social media and online content.
Don’t stick your head in the sand
During unstable times is not the time to retreat and stick your head in the sand. If you and your business are feeling the effect of less stable economic times, then your customers are too.
Engage with your clients and customers more, discover their pain points, spending habits, decision-making process, and look at how your company can help improve their situation.
Be innovative with the products you have and ensure they are serving the needs of your customers.
When was the last time you reviewed the business expenses? Sometimes we can get so distracted by the day to day running of the business that we forget to go back to basics and check things such as how much are you spending in certain areas to maintain the status quo.
You may find that some expenses have grown over time and are now much more impactful than you had thought. Reviewing your company expenses in depth gives you the opportunity to look for potential ways that you could reduce your outgoings and ensure that the income your business receives is being utilised in the best way possible and not going straight back out the door on unnecessary costs.
Review processes and procedures
Look at ways to streamline your processes and procedures to ensure your business is as efficient as possible and not wasting resources to get the job done.
Could you use technology to improve your workflows or are your sales team not communicating with the marketing team leading to missed opportunities?
In challenging times, there is no room for ineffective processes that could be harmful to the running of your company. Identify and address any issues now.
Do you have appropriate financial protection in place?
For example, how would the business cope if you lost a key person tomorrow? Or a director suddenly died? If your loans were suddenly recalled as a result, could you meet that financial cost?
Or if you personally became seriously ill, would the business struggle to continue? Would your family be able to pay the bills if your income reduced or ceased tomorrow?
It is essential to consider adequately protecting both you and your business against the unknown. There are many different options, and that’s why it is vital to find the right solution for your specific needs. You may want to consider seeking financial advice and working with a Life Centred Financial Planner who can help you assess your requirements and identify the best way forward so you can have peace of mind.
We offer a 30 minute complimentary consultation allowing you to discuss your concerns and find out how we can support you and your business to build a brighter future. Contact us today to book your space.
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MRA help individuals, businesses and families achieve the best quality of life they can with the resources they have. MRA specialise in corporate solutions, cash-flow analysis, life centred planning and much more.
Business Consultants based in East Sussex we service clients across the South East, Sussex and Kent, including smaller towns such as Ashford, Battle, Bexhill, Bodiam, Brighton & Hove, Cranbrook, Crowborough, Eastbourne, Hailsham, Hastings, Heathfield, Herstmonceux, Lewes, Mayfield, Newhaven, Rye, Seaford, Sevenoaks, Tenterden, Tonbridge and Tunbridge Wells.