Running your own business is tough at the best of times, but it can be even more stressful when economic conditions are difficult.
When you’re faced with rising costs, falling sales, cashflow problems and supplier issues, trying to stay afloat can be a tricky business. Here are three tips to help you manage your company when times are uncertain.
Minimise your costs and maximise your efficiency
Reducing your outgoings to the bare minimum is vital to the success of your company and becomes even more critical when times are hard. Make sure you justify every single business expense and get the most for every pound that you spend.
It is worth analysing all your costs, even your fixed costs. You may think that your fixed costs – your rent, wages or bills – can’t change but there can often be savings to be made if you try.
It may be easier to make savings on your variable costs – costs linked to how much you sell or produce. For example, you may be able to find cheaper packaging materials and stock, reduce your vehicle/transportation costs and save money on overtime.
In some cases, you may find that your business needs to reduce its staff costs in order to survive. For example, you could employ part-time staff in certain parts of your business although you may have no choice but to make certain jobs redundant.
Be careful that you cut costs in the right areas and remember that minimising costs is not just about finding a lower price. It involves you getting the maximum value for money for the cash you’re spending.
Make sure your cashflow is good
Making sure you have enough cash in the bank to sustain your business can be the difference between success and failure.
There are lots of steps you can take to maintain a healthy cashflow. For example, you can:
• Maximise your sales volume
• Reduce the levels of stock you keep
• Renegotiating your credit arrangements
• Selling off business assets
• Avoiding overtrading (work you cannot fulfil to price)
• Minimising costs
Revise your plans
When you find yourself in an uncertain or difficult market, you may have to sit down and revise your business plan as you may not be able to achieve the sales or targets you had set.
Look at and analyse the current market before you set new targets and consider changing your business development strategy. And, make sure you look after your existing customers as retaining them is easier than attracting new ones.
It is also useful to make contingency plans for what you would do in certain ‘worst case’ scenarios. For example, you might lose a major customer or the cost of your stock might suddenly rise. If you have plans which you can implement straight away in these situations then you can act quickly and decisively should they occur. Similarly, work out strategies for what you would do if an opportunity suddenly arose, such as a competitor going out of business.