Every business faces challenges, especially SMEs (Small to Medium Enterprises). There are a few specific challenges that have been forecasted for the year ahead, which business owners are likely to encounter during 2011. If these are potential problems for your business, start to think of ways to combat these tribulations beforehand. It is a good idea to create an up to date business plan for 2011 which will outline your goals for the year and help you to stay on track should you be faced with any challenges.
Typically an SME will have a small team; therefore most workers have to be multi-skilled and are rarely just specialists in one particular field. Potential results from a lack of specialist staff include the blurring of roles, overlaps on jobs and a less distinguished line between managers/directors and staff. The challenge of overcoming these issues is one that many SMEs are likely to face during this year. It is important that the roles of each employee are clear and distinguished from each other in order to take control of this issue. An increased level of communication can potentially prevent overlaps on jobs.
When the owner’s skills constitute the main product or service, this is a challenge in itself. Results of this include a lack of administration, compliance and governance. SME owners can also struggle to keep up to date with everything; this generally happens when one attempts to stay on top of everything! It is worth considering the hiring of individual specialist staff to combat this problem. Although it might be expensive, you may find that your productivity (and subsequently your revenue) could go up since you are focusing purely on your specialist field and not having to worry about things such as marketing, IT or accounts. Another option is to hire an office manager to take care of many of the time consuming tasks and take the load off you.
Banks generally consider SMEs to be high risk due to their lack of security and equity (when compared to large companies), and a challenge your business may face could be limited access to capital. This lack of capital can take away from money used to promote innovation, research and development and as such can prohibit growth. This year, be sure to manage your accounts receivables well, protect your cash flow and try to also maintain a high level of liquidity to support your business. By staying independent from banks you should hopefully not have to worry about not being able to obtain finance from a bank. Speak to us about other ways to keep your business liquid.
High levels of staff turnover is a challenge faced by many SMEs and is predicted to be especially the case this year, as many companies regroup and merge in the wake of the GFC. Since this costs money, an obvious source of cash to fund these changes can be found by cutting employee’s salaries or cutting the number of staff. Remember that this will leave many of your staff disgruntled and studies have shown when businesses cut their head count by 10 per cent, they can expect another 15 per cent to leave by the following year. Consider how much it costs to train new employees and replace years of experience and if it is more than you can afford do your best to keep your current employees and find some money elsewhere! Experienced staff will be a solid base in the mayhem of a hard year, not to mention handy to have around when things pick up again.
TIPS FOR 2011
• Pay your tax on time
• Do your best to always have your own capital to avoid reliance on financial institutions.
• When you are lacking knowledge and expertise, pay for some expert advice, it is almost always worth it.
• Consider appointing an independent director that can bring and enhance skills within the company and shine a new light on old issues.
• Clearly outline the role of each person within the business.
• Make sure you have (and are enforcing) policies with regards to issues such as OH&S, bullying & harassment, equal opportunity and administration. Every employee should have a copy of every policy to prevent the business becoming liable should something bad happen.
• Be aware of your business’ financial situation.
• Join organisations and attend courses to stay informed about the business world.
If you would like more information on any of the things mentioned in this article, or would like to create/update a business plan to work towards having a successful 2011, contact our experienced team of accountants, lawyers and financial planners here at The Quinn Group. Submit an online enquiry or call 1300 QUINNS (784 667) or +61 2 9223 9166 to book an appointment.