One of the most difficult challenges small business owners face, as they attempt to ride out this recession, is uncertainty about the future.
And of course, uncertainty makes it tricky to plan, let alone to feel confident about staying afloat.
But according to business advisor Luke Kemeys from nextAdvisory, if business owners can remain agile and navigate change, there’s no reason they can’t survive (and even thrive).
In fact, he believes these challenges will ultimately build resilience, making for stronger and smarter businesses in the long run.
We asked Luke for his top five pieces of advice to help small business owners come out of this recession on top.
1. Work towards a plan
It’s an age-old saying: If you fail to prepare, you are preparing to fail. Still, lots of businesses don’t have plans.
“Sometimes that’s because it’s not always easy,” says Luke.
“Business owners might not have anyone to talk to about their plans, the conversations they need to have might be tricky, or they’re just so busy doing day-to-day stuff, they struggle to pull themselves out and think about what they actually want from their business.
“There’s also the Kiwi idea that we’re too shy to talk about what we want to achieve because we worry what people will think.
“But it’s worthwhile stopping at least once a year to figure it out, and now especially is a critical time.”
“If you’re struggling to get to this point, ask yourself: ‘Do I want to go somewhere, or am I going to keep doing the same thing every single year and remain static?’.”
Once the plan’s developed, Luke says communicating it with your team (no matter how you choose to do that) is vital.
“We’ve got clients who have put their 12-month business plans on the wall for staff to see, so there’s plenty of transparency and understanding.
“Some are even going as far as adding their profit and loss statements so that if cutbacks have to be made, staff can see why – that there’s not a bottomless pit of money.”
2. Use technology to increase efficiency
One silver lining that quickly surfaced as lockdown restrictions hit was the surge in the use of time-saving technologies, particularly the likes of Zoom.
While this has already increased efficiencies for many businesses, Luke believes now’s the time to look for more opportunities to implement technology to get ahead.
“Business owners should be looking at every instance they use paper, for example, and asking themselves why. We’re huge fans of the iPad Pro which removes the need for paper.
“One activity we get business owners to do is figure out two things in their business they hate doing because usually they’re tied up with repetition or something inefficient.
“The bottom line is that these things will put time back in your day, meaning increased margins or at least the ability to produce at a higher rate.
“If we’re looking at the wider notion of increasing efficiencies and profitability, bolting on up-sells is a great way to do this.
- Sell more of the same thing to the same person (eg buy 10 golf balls and get another 5 at a discounted price).
- Sell different products to the same customers (eg add a set of golf tees).
- Offer priority orders (for faster delivery)
“When you start to scale this type of thing, it can add significant margins.”
Luke’s top 5 technologies for increasing efficiency:
- Talk to text/audio sound bites – removes the need to type
- Gocardless.com (take payment via direct debit) and Stripe.com (payment via credit card)
- Calendly.com – to schedule online meetings
- Shopify.com – online shopping for any business
- Upwork.com – worldwide contractors allowing outsourcing of virtually any tasks
“What I would say though, is it’s important to do a bit of a study before you implement another layer of technology because it often involves adding another process, and doesn’t work 100% of the time.
“You have to be careful it’s actually solving a core problem and you’re not just jumping at the latest, shiny object for the sake of it.”
3. Cut out time wasting practices
Luke believes that historically, businesses have simply thrown more money at problems thinking, ‘Let’s just hire someone else’, rather than ‘How can we be smarter with the people and practices we’ve got?’.
“Before businesses were forced into it through lockdown, working from home has always been an option for many organisations, yet staff haven’t always been empowered or trusted to do it.
“Businesses really need to think about how they can encourage this more and create an environment for people to be able to work from home.
“The challenge is to figure out how to do it well. And for businesses who aren’t allowing this to happen, they need to ask themselves, ‘Am I at risk of staff moving to a competitor?’.”
“We also need to get better at productivity in meetings, trimming these down and not just running them for the sake of it.”
Likewise, he encourages business owners to empower staff to make decisions, so progress isn’t stalled.
But it doesn’t stop there.
“One of the big things companies are doing in the States is teaching people how to read faster. We spend so much time reading, so if you can improve your staff’s ability to consume and understand information, you can improve your efficiency by tens of thousands of hours across the heap of staff.”
4. Understand cash and modelling scenarios
According to Luke, not understanding how cash flows through a business is the number one issue for business owners.
“This is particularly important now with things as they are. You need to be able to model how it would look for your cash flow if a customer is unable to pay.
“Or if you’re looking to hire someone, you need to understand what that will mean for the bank balance.
“We try and keep it simple with clients and look at what’s going in, what’s going out and what that that leaves them with.”
Luke’s top tactics for understanding cash:
- Split your GST and tax into separate accounts so you know your numbers.
- Build a rainy-day fund so you’ve got a buffer should things go south. Aim for 3 months’ worth of overheads.
- Improve cash collection. Set your own terms for invoice due dates (it doesn’t always have to be the 20th of the following month) and charge a deposit.
“If you can stay on the front font when it comes to cash, decision making becomes a lot faster, and you can use your time more effectively.”
5. Operate from a sense of confidence
According to Luke, this is all about having the confidence to make decisions which comes from the practices you have in place to do that.
“This is important because as things become unsettling, decision making gets hard and it’s easy to get stuck. Opportunities get missed and businesses can get left behind where competitors are moving faster.”
He says business owners need to figure out what their risk profile is and how they can give themselves confidence if they need to make tough decisions in these times.
“Think about where you’ve shown confidence previously and how you can use that as a blue blueprint if you’re in a tough spot again, so you’re not stuck in limbo land.”
“The amount of time Kiwi business owners waste ‘thinking about it’ is costing our economy millions in lost productivity and progress. Learn to make decisions quickly and it will improve your business beyond belief.”
Luke believes that a sense of confidence can also come from protecting your health and mental wellbeing.
“Try not to get bogged down with articles about recessions for example, because you’ll slow yourself down and start to worry.
“And don’t burden the tough stuff on your own. Share it with your team and advisers and approach things proactively.”
Luke’s final parting words…
“Don’t spend money until you’ve truly earned it.
“This is where a lot of businesses have tripped up this year. They’re living off someone else’s money. So, they might have been running an event and already spent the money collected from ticket sales, only to have cancelled.
“Until you’ve actually delivered the service or product, don’t assume the money’s yours. It’s a good way to protect yourself in a time like this.”