As a small business owner in Australia, you are probably well familiar with the statistics surrounding small enterprises and the high business failure rate in that country. Sixty percent of new enterprises will close their doors within the first three years, and of those that do, just fifty percent will have made a profit. The sad truth is that a significant number of small firms do not make it very far, much less succeed in their respective fields. And unfortunately, even if your company is lucrative, it is still possible for it to collapse owing to the numerous other issues.
82% of small businesses fail due to cash flow problems. And while most small business owners agree cash flow is the #1 risk for small businesses, cash flow is also a blanket term – a symptom, if you will – of several underlying causes.
Although these are depressing statistics, it is important to keep in mind that as the owner of a business, there are a number of steps that you can take to ensure that your company does not fail like so many others have in the past and instead survives and thrives, unlike the majority of other businesses.
Entrepreneurs hold a large deal of authority inside their companies; yet, with this power also comes a significant amount of responsibility.
Attitude and mentality are important components of management, and they definitely have an impact on the bottom line.
When it comes to carrying out particular tasks, the owners of small businesses might sometimes become rigid in their approaches. This is especially true for owners of businesses with years of experience. So be sure you don’t put yourself in this predicament if you’re a new business owner. To be fair, it’s not only those who own businesses. It applies to everyone. It’s part of what that is to be human, and I think we’ve all done it at some time in our lives.
When a company is successful, business owners often make the mistake of being complacent and prone to making assumptions. They may also fool themselves into believing that their company is running most efficiently and effectively imaginable. But, when you least expect it, fallacy will pounce on you at this particular moment and cause havoc if you are not attentive.
You should now have a great knowledge of how to turn around a failing small business, thanks to these 10 reasons. This will ensure that your firm does not become a failure rate statistic.
This is a consideration that is especially important for proprietors of brand-new small businesses. It’s possible that a company plan that, on paper, seems like it would be successful won’t do as well in practice. (According to the Bureau of Labour Statistics, if you want to know the cold, hard reality, look at the vocations that are increasing the quickest.)
This does not mean that you should disregard the things that drive you. Instead, it indicates that you need to conduct some study and make some plans for your firm.
Creating a business plan compels you to identify your “Unique Value Proposition,” also known as your “UVP,” which sets your enterprise apart from others. For example, how will your food truck differentiate itself from the other food trucks that are parked in the lot? Could it be food? Do you think it’s the service? Is it the bright neon colours or the jolly decorations on the truck? Is it the constant marketing on social media platforms? Most likely, it’s a combination of all of the above. In order to keep a viable company model, it is necessary to differentiate oneself from one’s rivals.
Other crucial questions to ask yourself include: Who makes up the majority of your consumer base? When it comes to purchasing your product or service, will they do it in-store, online, or both? What exactly is your strategy for marketing? How exactly would potential clients become aware of your company? What are your predictions for the flow of cash? Your startup capital? How far can you get by with the money you have in the bank? Finally, remember that you will need money for your business and living expenses, as most firms do not generate a profit in their first year.
Give thoughtful consideration to issues of this nature while your company concept is still in the development phase. You will be able to increase the likelihood that your product or service will be a commercial success.
It is comparable to trying to operate a vehicle while wearing blindfolds if proper business records are not prepared in order to provide insight into the state of the company’s operations.
If you want to be successful in company management, you need to be able to answer the question, “Where are we at today?”
It ought to go without saying that companies who do not maintain reliable records are not in a position to respond to that matter in any way that is beneficial.
Again, businesses that provide services related to trade are more susceptible to risk.
Office work and money management are typically put on the back burner in favour of fulfilling basic needs, such as finding paid employment and making ends meet.
“Successful small companies need to have clearly stated financial goals and regularly understand the status of their firm compared to those goals,” says Grant Burchell, who works for Electrodry, one of Australia’s most successful residential and commercial cleaning companies franchise operations. The only method to do this is through the submission of financial reports on a weekly and monthly basis. If you don’t grasp what you need to bring in to cover your expenses as well as your own, it’s incredibly simple to fall into problems.
The only smart basis for future goals and longevity is understanding the actual status of your business at any given moment, knowing the genuine state of your finances, and documenting your business plan and financial records.
If you do a terrible job of managing your inventory, there is no way that your new firm will be successful. Period. The ATO identifies issues with inventory as one of the primary contributors to the failure of new firms. Poor management can frequently result in insufficient inventory or excess inventory, both of which are silent cash flow killers.
It’s a beginner error, but it’s one that’s easy to do, especially for new companies that don’t understand their sales habits. Utilize of inventory management software or a point of sale (POS) system that can track inventory and generate reports showing your top and worst selling goods to assist you to uncover sales patterns is the best method to address this issue. Another option is to use a POS system that can track inventory.
If you do not maintain track of the things that sell the best or of the times when those items are in great demand, you are going to run into inventory shortages, which will result in a reduction in your earnings.
In many instances, the inadequate planning, organisation, and control of the financial operations of the startup was the cause of the bad financial management that ultimately led to the firm’s demise. This was the case because poor financial management leads to business failure.
According to a research that the Australian Securities and Investments Commission published not too long ago, around 44 percent of small businesses lacked fundamental strategic management in reference to their financial operations. This information was found in the report.
Inadequate cash flow or excessive cash consumption in the absence of effective financial management and planning will inevitably lead to disaster.
When it comes to business, it’s best to take things methodically and steadily. If the market shifts or you experience a hard patch, rapid expansion, which typically involves financing on credit like a small business loan, might boomerang on you and cause your firm to fail.
Trying to take on more business than you are capable of managing not only depletes your working capital but also typically leads in a reduction in the product’s quality. Because of this, the quality of your product or service will decrease.
Instead, use discretion in the kind of clients you pursue and the methods you will use to repay the various company loans. It is necessary to learn to decline business opportunities at times.
This ongoing problem affects companies of all sizes, from the very largest to the very smallest. Businesses that put themselves in jeopardy by trying to finance their future expansion with money they don’t currently have are reckless.
You supplied the service that was requested of you, and you were entitled to payment for it; but they chose not to pay you. “You accomplished the task that was required of you; nonetheless, you were not compensated.”
Some sectors of the economy are more vulnerable to this conundrum than others. Those who work in the service industry or deliver goods and are paid only after the task is over are among the most vulnerable.
A client or customer who does not pay is not someone whom anybody enjoys having. Dealing with creditors is necessary for running a small business, and appropriate tactics need to be developed and implemented.
On the opposite side of the spectrum, there is nothing that can harm a fledgeling firm more quickly than falling short of its sales targets.
This may occur if you spend excessive time responding to a single, very large consumer. For example, suppose you own a café that relies heavily on the foot traffic of students during the academic year. In that case, you will need to find other customers throughout the summer in order to avoid going out of business.
The only way to guarantee that you will meet your sales goals is to derive insights from the already available data and then utilise those conclusions to guide the development of your sales plan. So again, a solid point of sale (POS) system is an excellent location to get started.
Small company entrepreneurs have a reputation for being a scrappy lot who often see themselves as experts in a wide variety of fields. However, just like any other type of person, business owners have their own set of advantages and disadvantages, as well as a limited amount of time in each day.
You should feel comfortable delegating tasks. Your company won’t start producing money until you delegate some of your tasks on the shoulders of other qualified individuals. This might involve employing your first workers or investing in software that reduces the busy work you have to perform.
When you were conceptualising your business, you probably envisioned prosperous times ahead, with satisfied clients, astute advertising, and lots of money. Probably not what you had in mind when you pictured spreadsheet after spreadsheet. However, the majority of time spent running a firm is spent on administrative responsibilities.
Administrative tasks, such as managing goods and staff, as well as all of the paperwork and accounting involved in the never-ending effort to fulfil your financing targets and make a profit, can consume your whole day quickly.
Therefore, get ready. Either adjust your workforce properly or look to automation to handle many of your repetitive activities. To give you an idea, the iPad point of sale that ShopKeep offers is fully compatible with QuickBooks, so you will never have to enter your sales data manually. This kind of shortcut saves you time; as everyone knows, time is money.
The adage “the customer is always right” rings truer than it ever has before in this connected era. For instance, customers in today’s market anticipate that even the smallest mom-and-pop shops would take major credit cards and digital “currency” like Apple Pay, even if the store in question is only a few square feet in size. And they have high expectations for the customer service they receive. So expect your clients to voice their dissatisfaction via social media and other channels of communication if you fail to deliver the promised service.
Review sites and other platforms magnify word-of-mouth marketing, which may have both positive and negative effects. Because we live in a society that is so obsessed with technology, it is now simpler than ever for customers to express their thoughts and opinions regarding the companies they interact with. This also means that it is now simpler than ever for owners of businesses to monitor customer feedback and solicit it.
All social media sites, such as Facebook, Twitter, Instagram, and Pinterest, are excellent social listening tools that make it simpler than ever before to pay attention to what your consumers have to say. In fact, in this day and age, clients frequently choose to use social media platforms rather than conventional phone calls to get in touch with businesses because it is a more time-efficient choice. In addition, it is now more simpler than ever before to determine whether it is appropriate to participate in conversation with a client since push alerts will inform you whenever a consumer mentions, retweets, likes, pins, or pokes your company.
Yelp has become one of the most popular places for individuals who are interested in locating local companies. It is also an excellent site to find out what consumers are saying about their experiences with your company since it has a combined total of more than 148 million reviews. In addition, yelp encourages the business owner to get into the conversation when their company receives a low review. This allows the business owner to apologise or explain the situation.
This is a more passive medium than social media, but it is incredibly significant all the same, just like Yelp. Six out of ten customers are now turning to Google first when seeking for product reviews, giving Google a commanding lead in the review business. In addition, Google evaluations of your company are likely going to be one of the first things a user notices about your company since in today’s world, virtually everything can be found on Google.
Trustpilot is widely regarded as one of the most reliable websites for providing feedback from customers. They have established a whole online review community that is committed to assisting consumers in sharing their honest experiences, and each day more than 45,000 new reviewers join the group.
Customer surveys continue to be one of the most effective techniques to enquire particular and pointed inquiries of clients. If you capture email addresses from clients at the point of sale, you will be able to rapidly identify your most valuable customers as well as former customers who were less involved with your brand. Using these responses, you may use the online tool SurveyMonkey to design a free questionnaire to learn how to enhance your company’s operations. Of course, it doesn’t hurt to provide a reward for completion, such as a discount on their next purchase, and it certainly doesn’t harm morale.
Considering that 85 percent of customers say they trust online reviews just as much as personal recommendations, maintaining a positive online reputation is essential to ensuring that potential customers are not turned off by negative feedback. At the very least, you should make it a goal to ensure that the number of good reviews you receive is more than the number of bad reviews. Even if a single negative review might not be enough to bring down a new company, they do play a significant part in the success of traditional brick-and-mortar establishments.
You have an absolute minimum obligation to maintain the most recent version of your company’s information across the maximum number of channels. You have the ability with ShopKeep to maintain your online presence directly from the BackOffice of your POS system, but you also have the option to add your information wherever it appears on the web manually.
Traditional stubbornness comes in at number three on the list of the top reasons why small companies fail. It is simple for business owners to develop an unhealthy fixation with their company’s idea or product, even if there is overwhelming evidence to suggest that the venture will not be profitable.
It’s possible that by the time your traditional business is celebrating its second anniversary, the novelty and lustre of your brand-new store will have worn off, and fewer locals will be coming through its doors. So what do we do now? Do you allow yourself to become a statistic and accept defeat, or do you take the effort to figure out the areas in which you require adjustments? It’s possible that you may shift your business to caters to visitors, carry a new product that appeals to your consumer base, or use your space on the weekends to hold weddings and other celebrations.
It is possible that an attempt to pivot to eCommerce would fail on occasion. In most cases, physical businesses and online stores will exchange their inventory with one another. Even if you maintain them in different storage rooms, you could have to fulfil some of your online orders using the inventory from your physical shop if you run out of an item more quickly on your website than in your physical location. Unless, of course, you’d prefer send the package to your warehouse first and then send it on to the client, which would result in unneeded delays and a negative experience for the consumer. Investing in a point-of-sale (POS) system that can automate the transfer of merchandise between online and physical locations is the best way to prevent this situation.
Your modest company is going up against cash-rich behemoths in the industry. So what advantages do these colossal entities have over us? Data. A mountain of data.
Even if the size of your market is far less significant, you should still try to collect as much information as possible. Your capacity to make informed choices driven by data will be severely hindered if you do not have real-time visibility into your company’s performance.
For instance, you need to have unobstructed access into the amounts of money coming in and going out of your business. If you don’t have this information, you might as well be flying blind.
If you want to acquire a new line of merchandise or make some upgrades to your storefront, you need to know how it is going to effect your bottom line. If you want to know how it is going to impact your bottom line, you need to look at the expense side of the equation. In addition, you need to close check not only on these expenditures but on all of your other charges.
In order to establish reasonable goals for cost reduction, you, as a company owner, need to know what proportion of income you can put towards the payment of employee compensation, utility bills, or the payment of rent. When it comes to revenue, you want your company to be growing either month-over-month or year-over-year.
If you are not successful in reaching your objectives, you should investigate the aspects of your company that involve excessive expenditure (also known as the expense side). In addition, it is helpful to be aware of your nett income to prevent your costs from outstripping your revenues and turning your company into a statistic representing the percentage of businesses that fail.
To begin, you will need to calculate your Gross Profit (GP) by first determining your Cost of Goods Sold (COGS) and then deducting that figure from your total nett sales. This will give you your GP. BackOffice is where you may discover reports such as these and many more if you are utilising a point of sale (POS) system like ShopKeep.
Your operating profit is the second consideration that will be necessary for this computation (OP). To get the operational profit, take the gross profit and deduct all of your running costs, such as rent, utilities, and payroll. This will give you the operating profit. Again, if you are keeping your books on a computer using accounting software, you will have no trouble retrieving this information.
Last but not least, you have costs that are not directly related to your operations. Taxes and any interest you may owe on loans or cash advances are examples of the kind of costs that fall into this category. These charges do not affect core business operations, such as operating earnings. After deducting your non-operating costs from your operational profit, the amount that is left over is your nett income.
To successfully manage a lean business, you need a long-term and continuous plan. This strategy should work towards the elimination of waste in order to increase the speed, agility, and quality of business processes, all while maximising the value that is provided to consumers.
It might sound impossible to accomplish more with fewer resources, but once you break the process down into smaller pieces, it’s actually lot simpler than you might think it would be. The build-measure-learn technique is the foundation of the lean business concept.
The primary concept that underpins the construction is that Rome wasn’t constructed in a single day. Neither was the e-mail service Gmail from Google, the iPhone from Apple, or the online megastore Amazon. Moreover, businesses didn’t always do all of the wonderful and sophisticated things they are renowned for today when they first opened their doors. For example, Amazon began as an online bookshop but has now expanded into other areas, such as the provision of grocery delivery and streaming music services. The point is that these businesses began with a fundamental concept, or what is known in the business world as a Minimum Viable Product (MVP), which is a product that can be released onto the market.
After that, these businesses carried out measurements. During the experiment phase in which they were gathering data, they measured the outcome of the MVP. How did customers react to the product or service that your company offers? Have they responded in the way you anticipated they would, or does their behaviour completely contradict what you had hypothesised they would do?
After you have gathered some trustworthy data measurements, you can decide how to proceed based on the outcomes of those data measurements. For example, have you been correct all along, and you only now have the data to back up your assertion? Or have the measures given you some insight into areas where you might improve?
In order to implement this strategy into your locally owned and operated company, you will need to review your business plan. What exactly are you looking to construct? What are some of your objectives? What is the bare minimum required for you to get started?
Know that whatever the result is, it is supported by accurate data that you can trust to assist you in pivoting your company in the direction that will help it be the most successful.
The effective operation of a firm is not something that can be left to the whims of chance or good fortune. Instead, a firm must have a well-defined business strategy, strategic operations, and strong financial management to be successful from the beginning and throughout its existence.
The amount of time that passes between gathering data and its subsequent analysis is drastically cut down by using real-time data, which in turn makes your company more nimble and sensitive to shifting market tendencies. And if there is one thing that every small and medium-sized firm has an advantage over big-box retailers, it is the inherent capacity to be nimble since they don’t have to cut through the corporate red tape in order to make adjustments. Instead, they are able to view the trends in the data in real time and respond appropriately.
If half of all new firms are unsuccessful, then it is possible for half of all new enterprises to be successful. Beginning a new business is an exciting endeavour, but it can only be successful if there is a significant demand for the product or service being offered in the market. You need to be aware that the success of your company depends on careful strategic planning and responsible financial management, both of which should begin well in advance of the company’s launch and should continue unabated for the duration of the company’s existence. Whether you intend to launch a new business or already run one, this is true.
Proprietors of small businesses need to allocate time and energy into company planning and visibility if they want to ensure that their companies are successfully managed and easily available to clients.
THIS WEBSITE IS ONLY INTENDED TO PROVIDE GENERAL ADVICE; IT DOES NOT PROVIDE PERSONAL FINANCIAL OR INVESTMENT ADVICE IN ANY FORM. ALSO, CHANGES IN LEGISLATION MAY OCCUR FREQUENTLY. BEFORE TAKING ANY ACTIONS DEPENDING ON THE CONTENTS OF THIS INFORMATION, WE STRONGLY RECOMMEND THAT YOU SEEK OUR OFFICIAL ADVICE FIRST. THE INFORMATION CONTAINED IN THIS DOCUMENT HAS BEEN OBTAINED FROM SOURCES THAT EWM ACCOUNTANTS & BUSINESS ADVISORS BELIEVES TO BE RELIABLE; HOWEVER, WE MAKE NO REPRESENTATIONS OR WARRANTIES AS TO THE ACCURACY OF SUCH INFORMATION AND ACCEPT NO LIABILITY IN CONNECTION THEREWITH. WE RECOMMEND THAT YOU CONSULT WITH A TAX ADVISOR, a CPA, a FINANCIAL ADVISOR, an ATTORNEY, AN ACCOUNTANT, AND ANY OTHER PROFESSIONAL THAT CAN HELP YOU TO UNDERSTAND AND EVALUATE THE RISKS THAT ARE ASSOCIATED WITH ANY INVESTMENT.
Guest post by : team Form -
Like this? Share it...