Top tips for small businesses
Here at CHN consulting, we challenged each other to come up with our top 3 pieces of advice we would give to someone running a small business. Here’s what we came up with:
- Manage your cash! The biggest cause of small business failure is not lack of profits, it’s failure to understand the difference between profit and cash. You may sell all of your current stock to a customer at a profit margin of 50%, but if they don’t pay you for 6 months, you will not have the cash to replenish your stock or to pay your bills and you may find that you have gone bust before the cash ever came in. Agreeing credit terms with your customers and suppliers is really important but so is preparing a cash budget so that you can identify times when your cash may be low, and have bank facilities on hand to support you. Knowledge is power when it comes to managing cash.
- Network! Very few people enjoy networking but, as the saying goes, if you don’t blow your own trumpet, no-one else will blow it for you! Consider joining local Chamber of Commerce groups or other business networking groups. Not only will people get to know you and your business, but you will make contacts that may prove invaluable to you. If you’re too shy to go to physical networking meetings, many local business groups now offer online meetings.
- Understand who your customers are…and target them! For some well-established businesses, word of mouth is all they need to keep their business healthy but for start-ups, there is lots of work to do. Ask every client to like and share your Facebook page, perhaps adding a comment that they loved your product/service, utilise social media as appropriate and consider advertising. If you are setting up a dog walking business, talk to all local vets and ask them to put up posters and share your business cards, setting up a football training academy may benefit from advertising in school newsletters and local youth groups, whereas a more general audience for your business may require an advert in your local newspaper. Clients will not just appear, it is your job to find them.
- If you have staff, treat them well! If your staff feel appreciated, they will want to deliver the very best that they can for you. It doesn’t need to cost an arm and a leg to reward staff, some rewards such as a bunch of flowers, or a bottle of wine to say thanks for going the extra mile, count as a trivial benefit and so will be tax deductible for your business while not being taxable on your employee. Staff entertaining is always deductible for you and tax free for the employee up to £150 per annum. Even just saying ‘thank-you for your hard work’ goes a long way to making someone feel valued at the end of a hard day.
- Record everything! unfortunately part of running a business is that you have to keep records – copies of all invoices and expenses. Establish a system for keeping records right at the start of your business and keep it up to date…….trying to remember what a receipt was for from 6 months ago is almost impossible but if you set aside time at the end of each week to process your income and expenses, life will be much easier. As we move towards ‘Making Tax Digital’, record keeping will become even more important and you may want to consider using an accounting system such as Quickbooks, Xero or Sage to help….it’s not too onerous, Colin and I use Quickbooks and we just make sure that every time we incur an expense, we take a photo of it on our phone, upload it to the app, and link it to the appropriate category. The added benefit of doing this is that at any given moment, we can see how our business is doing.
- If in doubt, ask for help! Colin and I know our limits (most of the time). In the past couple of years, we have used the services of a web-designer, a lawyer, a gardener, a carpenter, a decorator, a plumber and an electrician. We messed up last year by trying to completely re-landscape our garden by ourselves, and the harsh reality is that we have ended up spending much more than if we had got someone professional to do it – partly because we didn’t get the trade discounts that a landscaper could have got and partly because we had to pay to have it re-done when we made a mess of it. Whether it’s speaking to Colin and I to make sure you are making the correct business and tax decisions, getting the help of a web-designer so that your website looks professional or sub-contracting some of your work when you are really busy, sometimes spending a bit of cash to use an expert is actually cheaper in the long run.