The statistics on the success of the smaller business can be daunting to read. If you run a small business, keeping track of all your figures and understanding how the business is performing is essential if you want to identify problems before they turn into the kind of issues that can bring your business down. As soon as you spot that profits are below what you predicted in your business plan, or growth isn’t taking place at the anticipated rate, you need to step in and find out why, so you can deal with the issue before it gets out of control.
Pinpointing the cause of the underperformance might be obvious, in which case you can get to grips with it immediately, but often there is no clear cause, and you have to partake in further research. Examine every element of your business to see if you can identify the weakness that is behind the problem.
- Products: Back to basics – are they of the right quality for the market you’re selling in to? Has there been a reduction in quality since you started that could be affecting sales? Did you get your market analysis wrong, which has meant you aren’t able to sell the quantities you forecast? Do you need to review your pricing? Maybe the purchase costs have risen, and you haven’t put your retail prices up to cover it, which means you’re absorbing the price rise into the business, affecting the profit margin on your products.
- Staff: Is everyone performing at their best, or is there someone whose productivity isn’t high enough, or who isn’t achieving the accuracy and speed required for their job? If this is someone who has previously worked well for you there could be a welfare issue that needs addressing, so check this before starting to issue warnings and going down the disciplinary road. It could be that you have too many or not enough staff for the amount of business you’re doing, either of which will affect productivity.
- Marketing: If you aren’t getting the right message to the right people, you have no chance of attracting customers and achieving your sales targets. You should be analysing the outcomes of each element of your marketing strategy, and if one is not working for you then it needs to be revised, or something else tried instead. Identify elements that are performing well and see if you can replicate that in another area, or expand this aspect of your strategy. Revisit your avatar, product positioning, and investment into marketing and if one approach isn’t bringing the sales in don’t be afraid to scrap it and try something different.
- Overheads: Have a look at everything you’re paying for to see if there has been any unanticipated increase in any of your costs. Rent, power, staffing costs, packaging, logistics, services like accountancy and cleaning, legal fees, tax; look at every outgoing and compare it with your budget to find out if you’re paying more for something than you thought you would. Sometimes there’s not a lot you can do about changing these costs, but if you know what’s costing you more you can try to negotiate, or find a different way of operating that will save you money.
- Productivity: High levels of productivity are essential if you expect your business to flourish. When you analyse your workplace productivity, you must include yourself as well as your team. It may be that you are spending too much time on admin for instance, and not putting enough into sales. Maybe your processes need an overhaul, for example, if you have a lengthy stock control procedure in place that is taking longer to accomplish than it needs to, can it be amended, condensed or replaced with a more streamlined way of working?
Financing your recovery operation
Once you’ve identified what is affecting your profits, you need to look at ways of addressing the problem before you lose any more money. Depending on your situation, you might need to consider extra investment to keep the business afloat or cover your personal living expenses, so you don’t have to draw so much from the business. You might have a problem that will take a while to fix, or it could be that you need to find new suppliers or staff that can take a while to put in place. If this is the case, you need to assess how you can best keep the business operating over this period. Consult with a financial adviser or your accountant for advice on the best way to tackle a money shortfall, as there will be numerous factors to consider when looking to increase borrowing. Use a legitimate finance company like Bonsai Prestamos to explore the various credit solutions available to you before making any decisions.
Taking action to rectify the problem
Having identified what’s going wrong, you then need to decide what to do to stop any further decline and get your business back on track. It’s not always easy to know what to do, so if you’re at a loss seek some professional advice. There are experts specialising in every aspect of business who can help you if you can’t see the solution to a problem with your marketing or staffing for example. You can always consult the Internet too, for there are many very helpful business guides available, just make sure that the sites are authoritative and relevant to your situation. You may have to let staff go, or close an arm of your business to save costs and help things run more smoothly – it’s not unusual for businesses to dive into expansion before they’re ready, leading to sustainability problems. It’s your role to make any hard decisions that need to be made and making one person redundant now is better than limping along and then having to make your whole workforce redundant down the line.
Sometimes a business can’t be saved, however before you reach this stage, there are actions and ways you can work to prevent this becoming inevitable. By taking some of the steps aforementioned, you can be well on your way to putting your business back on the road to profitability.