8 Practical ways for small business to survive in 2021

it’s been a hard slog for some businesses in 2020 and it hasn’t let up in 2021. Other businesses have actually thrived. We take a hard look into what businesses did to get through 2020 and what they are doing for the rest of 2021.

1.     Forecasting and how to do it right

 While we don’t know exactly what the future will hold, and COVID19 has pretty much burst that bubble for everyone in business, we can make an educated “guess” as to how our future sales and costs might look. We can do this by looking at our historical financials, industry trends, and global circumstances (as best we can).

Using the art of science, You combine historical data with your future prediction such as:

·      Look at what revenue you’ve earned to date

·      How have you been spending money

·      Has your cost of sales percentage changed

·      What do you have in the pipeline

·      Do you have seasonal trends

Using short, medium and long range forecasting, you can gauge how your business is going to operate and what decisions you need to make in the way of planning, pivoting and expanding.

Short Range – Less than 3 months, this is usually quarterly/seasonal planning

 Medium Range – 3 months to 3 years, perfect for planning sales projections, production planning, budgeting etc

 Long Range – 3 years plus. These are utilised when planning for new products, renting/purchasing a facility, research and development, funding or investment needs and opportunities, and capital expenditures.

 While most businesses opt only for a 1 year plan, we believe having a broad idea of your business projections will help when the unexpected arises such as a worldwide pandemic! Having an existing plan to review and modify is much quicker and easier, than having to create one from scratch when circumstances suddenly change. You’re able to look at your 3, 12, 36 month plan and see where you need to pivot, scale and adjust your expenditure, operations and plans.

 2.     Back up $

 You’ve heard people say you need to save for a rainy day. But sometimes when it rains, it pours! Maintaining a cash reserve for rainy days is good business practice, but understandably, these can come under pressure during extended times of business slowdown.

 How much do you need to keep afloat if the unexpected were to happen? Illness/injury, family emergency, industry shutdown, supplier shortages etc

 A study conducted by Forrester Consulting via Xero concluded that 70% of small businesses expected a decline in overall revenue for 2020. That is huge for anyone business, let alone for a sole trader or other small business, whom might be the main income earner in their household.

 While people like Scott Page state that a good rule of thumb is to have 3 months cover for expenses in reserves, what is the golden rule for business?

 The answer really depends on your own business and industry circumstances.

 To help work out how much your business should put aside as backup, let’s look at the two main categories of business expenditure:

·      Fixed costs - Rent, vehicle leases, insurance, required staff, etc are generally fixed and must be paid (the same amount) regardless of whether your business is open or temporarily closed. 

·      Variable costs – Inventory, raw materials, labour, electricity, etc vary depending on how many products you manufacture, clients you service, sales you make, etc. 

 Review your fixed costs and identify any exit clauses or relief available if in the circumstances you are unable to meet your obligations. Then based on some scenarios of closure or business reduction periods (eg. 3 weeks of lockdown, 2 months of low sales, etc), determine how much $ would be good to put in reserve. Small businesses should have two bank accounts – one for your general day to day operations, another to put GST and Income tax away. So our recommendation is to have at least one more bank account – which is your reserve for your rainy day.

 Variable costs generally follow sales, so have less risk. However, you may have a labour force to consider. It may not be appropriate to dismiss them suddenly. You may also consider keeping cash in reserve to keep your labour force ‘warm’ whilst in a slow/shutdown period. 

3.     Networking

2020 saw many networking events go online. 2021 has opened with online networking events and meetings being the norm. 

 Networking is usually done to build your client base or sales. This can also give the benefit of building connections with experts in other fields that may benefit your clients or provide cross-sale opportunities and referrals. 

 Ultimately, we want to give our clients the best experience possible. Being able to refer them or provide additional services with the assistance of others can be a win-win. They say it takes a village to raise a child, well, your business needs that village. We can’t be the best at everything and being able to recognise that is the first step. 

 So, build your tribe with like-minded people, that you would feel proud to refer. And be that person that they would be confident in referring too.

Some networking sites to consider:

·      Fresh Networking - https://freshnetworking.com.au

·      Business Chicks Australia - https://businesschicks.com/about-us/

·      Your local BNI - https://www.bni.com.au

4.     Customer Focus/Social Engagement

 ·      On demand access to your customer service team

·      What sets you apart from your competitor? 

·      What is your unique selling point that you can highlight on social media and marketing? 

·      What problem can you solve for your customers? 

·      Who is your customer? 

 These are great questions that will assist you in developing a marketing strategy and knowing what language and imagery to use for marketing. 

 Have you considered interviewing your current customers to understand why they chose you?

 It can be worth the investment to speak to a professional marketer to cement your value and give you focus on who you are targeting. 

 One of our recommendations is Marina Garbuio from Motivated Marketing - https://www.motivatingmarketing.com.au

5.     Remote working/Flexibility

 Are offices still needed? Some companies found that their staff were much more productive working remotely than coming into the office. Perhaps look at your current arrangement, can you downsize to save in rent? Could you go completely virtual? 

If choosing to have your staff work from home, it’s important to make sure you’ve provided them with correct equipment and support so that they’re happy, comfortable and productive. A review of your states work save regulations should be done. You may also review their employment contracts to update or add work from home clauses. 

Where is their principal place of work? This can have tax implications on how much they can deduct come tax time as working from home, which includes travel.

6.     Business Innovation

Hands up if you heard the words “pivot” in the last 10 months? 

For a lot of businesses, improving their products or services weren’t really an answer to catching the fall in sales. Instead, we saw a lot of businesses change up their offerings. Some were a slight shift; others were in a whole new ball game.

Keep one eye on your competitor and the other on your own path.

7.     Flexible payment options

Cashflow was quite tricky for some in 2020, and still is. Instead of taking yourself out of the running because you’re not affordable now, perhaps offer a flexible payment plan. Whether that be opting for platforms such as ZIP or Afterpay. Or self managing an incremental payment plan with your client. If you are to do the latter, make sure you draw up an MOU (memorandum of understanding) and that there is an end date to when the balance needs to be paid up by. Ideally within the same quarter, if not financial year.  

8.     Updating Tech & Automation

Utilise and delegate!

 It’s time to evaluate your business processes and see where you can cut out the middleman or speed up a lengthy and double handed process. This could include moving from personal warehousing to utilising a third-party logistic company. Or setting up chatbots to assist with frequently asked questions within your customer service enquiries.  

If there is a function in the business you don’t want to do (and feel your time would be better spent elsewhere in the business) – then delegate it!

If you need. Time to work on your business to take it to the next level and your accounts are on the back burner, it is more cost effective to handball your bookkeeping to experts such as us 😉

We are ready to help take your business to the next level. Taking care of the daily grind behind the scenes so you can get back to doing what you love and are good at.

If you need guidance and help getting into the right direction and want to know where you business is at, call us.