Throughout the last two years, many small business owners have faced the economic uncertainties accompanying an international pandemic. However, while many companies are struggling to navigate the continued results in the economy and consumer market, a few companies have become more successful. But what do these businesses have in common?
1. Make Strategic cuts
There’s a well-known adage that’s been proven true time and time again: “You have to spend money to make money.” But the time comes when spending far exceeds your income, and that’s a recipe for disaster. While you can’t eliminate expenses, there are many ways to reduce your overhead costs.
Invest in an Accountant
Hiring an expert to manage your finances is one of the best ways to cut costs in the long run, not only will you improve accuracy and avoid costly financial mistakes, but your accountant can help you identify potential tax deductions that could increase your net income.
Review your contracts
If you’ve been in business for a while, you can review your contracts and renegotiate the terms to save money. Your business has likely changed/grown, as has your relationship with your suppliers/third party suppliers. So take this opportunity to renegotiate essential contracts – or shop around for a better deal – to save money.
Trim Your Team
Employee salaries are a major part of most companies’ overall overheads. Wile downsizing might be an option, the best way to reduce employee costs is to make smarter hiring decisions in the first place: find employees with diverse skills and backgrounds or invest in training and development so you can fill the gaps in-house.
2. Solid Financial Management
Finances are the lifeblood of any business. Make sure you correctly manage your finances during this pandemic if you wish to achieve business growth.
You may need to cut certain expenses and invest more in high-growth areas to improve profits.
Analyze your balance sheet, income statement, and cash flow statement to keep business expenses under control. Find out about Burton Sweet’s Business Improvement Services and put together a growth plan that can be shared with your team and shareholders for clarity on the areas you may need to improve to achieve your targets and ambitions.
3. Promoting remote work
Even though the pandemic no longer forces us to work from home, many people will continue to do so. Working from home has worked surprisingly well for many employers and employees.
Workers were productive, and employers saw a future that would be less tied to an office. At the height of the pandemic, most jobs that required a computer were being done from home.
When the pandemic ends, those who can work from home are likely to do so two or three days a week, according to a study by Bloom . With some employees working part-time from home, this so-called hybrid working model looks likely to become the dominant form of office work.
Working from home allows people to skip their commute and give them more flexible working hours. In short, the ability to work from home is no longer a perk; many employees, especially new recruits, will expect it..
4. Small incremental steps lead to big changes
When you’re a global brand, a small change to your business processes can save millions, while the impact of small, inefficient business processes can drain your marketing budget. Most companies don’t want to change the way they do business, but they do want their bottom line to improve..
They let their employees work long hours without implementing better processes. The larger the organization, the higher the cost of inefficient operations. But you don’t always get significant results when you make big changes.
Small strategic changes can produce tremendous results. Just very small changes in your business can have a massive compounding effect. We’ve written a simplified business scenario on the magic of compounding if you want to see how this could work for you.
5. Rethink pricing strategy
Change can be difficult; sometimes it’s much easier to carry on as you are and not try to rock the boat.
When it comes to pricing, however, it’s not a good idea to stick with business as usual (or bury your head in the sand). Fear definitely creeps in, especially when you’re looking to raise your prices, but the reality is that sometimes raising your prices is necessary to run a more profitable business. This is especially true with the prospect of higher inflation in 2022.
How can you do that without too much stress? – or driving your customers somewhere else? It may also require rethinking your current pricing strategy.
Cost-plus pricing (for example) may not deliver the results you want, and you may seriously consider alternative strategies. The good news is that almost any company can improve their pricing performance as long as they take a structured and disciplined approach to pricing.
6. Having reliable management accounts
Management accounts – your monthly or weekly financial reports that contain information like your income statement, a balance sheet, and a cash flow forecast – are vital to business success. Why are they important, and why should you have them prepared (and look at them)?
Improves cash flow
Current management accounts allow you to assess your current financial position. This creates the basis for better cash flow forecasting and business planning.
Accurate up-to-date information
When you have an accurate view of your business today, you can make better decisions for tomorrow.
For example, this will help you to see operating margins or identify products that are slow to sell. You can monitor sales volume, enabling you to plan things like headcount more efficiently. And you have more information to plan your stock levels and ensure you have enough to meet demand.
Management accounts also give you more control over your business. You can see sales trends, such as comparisons to the same fiscal period in previous years, or volume changes for specific products.
You also have more control over your costs. when creating and studying management accounts. Expenses can easily get out of control, especially at busy times, but timely management accounts give you an easy-to-understand, instant overview. With this information, you can identify the areas where you can spend less but get the same result or greater results.
Need help securing long-term business success?
Our team provides advice on financial health best practices gathered from many years experience of small businesses like yours. From analysing your business performance and goals to improving your management reporting, we can help you make sure you always have your finger on the pulse of your business.
For further information and advice, we would be delighted to have a conversation with you – just call your usual contact at Burton Sweet or use the form below and we;ll call you back.