The most recent Small Business Confidence Index published by the Federation of Small Businesses (FSB) reveals that one in seven bosses are planning to reduce company size or sell up completely in 2018. This is the highest number recorded since the survey began in 2010. According to the organisation, extra business costs such as auto enrolment and late payments from clients are all strong factors driving pessimism in some firms. If you’re planning on taking your business in the other direction this year and are hoping to grow beyond a start up into a thriving small business, or take a small enterprise into the realms of medium-size, here are just a few of the hurdles you are likely to face.
Staff retention and recruitment
Once you’ve powered through those initial exciting months fuelled by energy and enthusiasm, you may find that you lose an employee or two. When you’ve been part of a close-knit team, it’s hard not to take this personally but it’s important to hold off any emotional response and think practically. Do your employment contracts adequately protect you and your intellectual property if staff members decide to move over to competitors or even set up in competition against you?
Now’s the time to have a professional look over your contracts and also to think about how you will retain the right staff long term. As your business grows, are you offering opportunities for training and development? Have you planned staff progression as part of your business? We all know the importance of reinvesting money into your business and if you rely on your staff and want to protect your previous time and monetary investment in them, this should be an area of focus. Allowing employees to take charge of their own ideas and putting time and effort into creating a positive work environment can also support staff retention goals.
Keeping cash flowing
Managing cash flow is often the biggest challenge faced by small businesses. If you’ve made it through the first year, you’ve done better than most, but you’ll still need to keep a keen eye on how much working capital your company needs. Late payments can have a huge impact on smaller companies in particular, but there are ways you can minimise their damage. Forward plan and think around issues. If a bank overdraft or loan is not an option and you’d prefer not to give up any control in exchange for an equity investment, you could consider setting up an invoice discounting arrangement (you can learn more about this here). This allows you to access a proportion of the money owed to you by clients before an invoice is paid, keeping your cash flowing.
Of course, lowering or managing your outgoings can help your business retain more of any money coming in. Assistance with apprenticeships, discounted premises, training grants and marketing may be accessible in your area to help support the growth of businesses like yours, so be sure to research possible support funds before you exhaust all your start up capital.
It wasn’t all pessimism in the quarterly FSB survey; half of firms reportedly plan to grow this year through spending on marketing activities. If up to now you’ve been a jack-of all-trades trying to manage marketing alongside everything else, is it time you took on a professional or outsourced to a reliable expert? For many businesses, failure to capitalise on initial success can mean the difference between a period of relative stability and sustained growth. When you do have money to reinvest, well-considered marketing can be as sound an investment as new equipment or more staff, which of course you may need if your marketing successfully increases demand. Is your business model easily scaled or is it time to evolve your structure, processes and perhaps even your premises…?
You’ve suddenly grown from a three-man band to a team of twelve and not only is there no room in the office but you’ve nowhere to meet your clients either. If you’re in the market for new premises, it pays to be wary of long-term leases with expensive get out clauses or no escape at all. Always have a solicitor look over your rental contract. If you’ve already tied yourself to somewhere that’s not quite fit for purpose now you’ve grown, there could be ways to make your current premises work for you long term. Consider whether you could work in partnership with other businesses such as local hospitality establishments to host meetings or training on their premises? Perhaps you could make use of temporary storage elsewhere too?
Despite the lack of optimism in some quarters, the reputation of British business in general is improving here in the UK, which can only bode well for SMEs operating on home ground. A recent survey by the CBI found that two thirds of adults agree that British business has a good reputation. Hopefully this post has helped increase your confidence levels and given you some points of action to consider as we all go into the new year with success in mind.