Julian Smith, MYOB general manager talks to Gill South about when times get tough in a small business and some of the ways of facing the challenges.
Most business start out with a great idea, a lot of courage on the part of the fledgling business owner, and a sense of freedom and excitement. What they sometimes lack is the formal planning and the systems and processes designed to make running a successful business easier.
Most people don't get into business to worry about doing the books and managing cash flow but they are a very necessary part of running a successful business.
It seems like a very simple premise - to run successfully, you have to have enough cash in your business to cover all your expenses - particularly the large lump sums like tax.
Cash flow is one of the key causes of small business failure - even for profitable operations.
Having simple, forward-looking cash flow measures in your business is like having a fuel gauge in your car. But for around 50 per cent of New Zealand small businesses, cash flow is not even measured - even though it is a constant source of pressure.
Get your pricing right
Other key issues include pricing correctly - particularly the cost of your own labour - and having good systems in place to manage things like credit.
Most of the challenges small businesses face, come down to planning and creating a system that works the way you do, to keep you in touch with the fundamental measures of how you are performing.
You need to know how much it is going to cost to run your business and produce what you are selling. Even if that's your own time and expertise you'll want to get paid - as well as making a profit and you'll want to make sure you can cover your debts - most of which can be simply handled with some research and planning and a good accounting system.
Many businesses get into trouble long before they realise there's anything wrong with their model. Without the right information it can be very hard to tell if a business is profitable or not. That's why starting with some help can make an enormous difference to the long term success of a small business.
Many businesses don't look for a trusted expert - be it an accountant, lawyer or banker - until it's crunch time. Our advice is to enlist the help of an 'expert team' much earlier - right at the set-up stage. The right contacts can help you plan your business, set up key systems and structures, and work through legislation, training and financing.
The majority of New Zealand businesses tell us that their most trusted advisor is their accountant. A good accountant or financial advisor can not only be a great help in establishing the fundamentals for your business, they are also a vital source of up-to-the-minute business advice. In particular, they can help you benchmark your performance against others in your industry, and help you look at how small changes to prices, costs of goods and other expenses can be made to improve your bottom line.
It's also a good idea to establish a strong relationship with your bank. Keep them in touch with your business and make arrangements early if you need to cover any short-term cash flow issues.
There's plenty of help available for businesses
There are many organisations, such as your regional chamber of commerce, offering discounted services to members, and many government agencies providing free advice and services to business. There's also now a wealth of free and independent information online, which can help you plan and grow your business.
A team approach to the success of your business will make all the difference. It not only draws in a range of expertise, it also enables you to focus on business fundamentals.
In the same way large companies have executive teams and boards to set strategy, your own professional team can help you make decisions, plan for development and identify what you need to do to grow. And independent advice can be absolutely crucial when you, yourself are very close to the business.
It's that time when businesses are thinking of ways to thank their loyal customers. What should SMEs with limited budgets be trying to say with their gifts, how do they make an impact that doesn't cost the earth? Send me, Gill South, your ideas at the email link below: