There are some important things SMEs should do to ensure their continued survival. After the unprecedented shocks thrown at us in 2020, 2021 will be one of budget repair for most businesses. Below we share some general advice for your business strategy from Helen Baker, MyBusiness.
1. Build client/customer relationships
You probably already know the importance of this one. But since COVID-19 first hit, how many businesses have had the time to do this? The immediate focus has been on survival: cost-cutting and streamlining operations, implementing new health and safety measures, potentially even pivoting entirely. It’s important to revisit customer relationships and how you can support them for mutual benefit. If your customer base has changed, you’ll need to focus on building new relationships to deliver repeat business going forward.
Ask yourself what the real value is of each customer and how much it cost you to get them. New customers generally cost more to acquire than maintaining existing ones. But you may just find the reverse is true: you’re spending more time and money serving low-value clients, and those precious resources would be better spent nurturing other relationships.
2. Focus on your suppliers
If COVID has taught us anything, it’s how crucial the supply chain is. Resilience and diversity are paramount to minimising operational disruptions. With this in mind, scrutinise your list of suppliers:
• Are there more efficient ways to receive goods and services?
• Are you being properly rewarded/supported by suppliers for your loyalty to them?
• Should you replace/diversify certain suppliers with better alternatives?
• What is the longer-term risk of using overseas suppliers?
• Should you consider manufacturing goods yourself?
• What can you realistically assume greater control over?
3. Look after your staff
A sad consequence of the pandemic has been the number of jobs lost. But for employers, the new challenge in 2021 will not be whether to let staff go but how to retain the ones they still have. The cost of staff turnover is enormous — recruitment, lost productivity, brand damage, loss of skills, poor fit, and payouts to departing workers. Yet it’s an expense that can, for the most part, be avoided if staff feel appreciated, challenged, and appropriately compensated. So, weigh up the costs of that pay rise/promotion and workplace rewards with losing one or more key staff members — especially if they jump ship to a competitor.
4. Location, location, location
A huge number of businesses have seen their teams move to remote working while surging e-commerce and social distancing restrictions have curbed foot traffic in many retail locations. If you haven’t already, consider whether your current business premises are still fit for purpose. Downsizing or relocating to more suitable premises could deliver substantial rent savings. Alternatively, engage with your landlord to negotiate a reduced rent that reflects the new reality. Remember, though, that breaking a lease can be expensive, and depending on the terms of your lease, you may have to foot the bill until a new tenant is found.
5. Cash flow
The most important thing of all though is cash flow. Analyse how you can reduce constraints in the year ahead. Consider offering early payment discounts to clients and value-adds for customers to get money in the door faster. Add a “pay now” option to electronic invoices to make it easier for clients to pay it, potentially even that same day. Ask your suppliers if they will give you a discount for early payments. Explore the various government grants available, which are essentially a free cash injection. Finally, do your taxes promptly. Getting refunds and accessing other tax assistance like the instant asset write-off is money you’re entitled to.
(Source: MyBusiness December 2020)