Now that the Recession is over, what should Small & Medium Businesses do next?
It has been a tough few years for small & medium businesses and those of us operating in the small and medium business space have undoubtedly felt the impact of the financial crisis. We have endured years of cost cutting and job losses in order to survive, but those of us that remain in business are in a reasonably strong position to start growing again as business and consumer confidence improves. Our biggest challenge now is our lack of investment during the bad years, which in many cases has been forced on us, due to weak earnings, economic uncertainty, and widespread lack of available financing.
We are now seeing moderate growth rates in the UK and the United States, driven by consumer demand and low inflation. In the United States, labor markets have improved, buoyed up by a stronger dollar and lower oil prices. US based small and medium businesses have created more jobs in the last 3 years than were shed during the financial crisis. This is mirrored in the UK, where new jobs have increased to pre-recession levels in 2014 and 2015. By and large, the UK’s small & medium businesses have recovered from the recession, with growth and start-up rates returning to pre-2008 levels, according to the Enterprise Research Centre (ERC).
Despite the positive economic indicators, not every business is benefiting equally and the availability of bank financing is still to return to pre-crisis levels. This impacts investment confidence and acts as a brake on small & medium business investment decisions. Business owners are also looking to new forms of financing such as crowd funding and online lending platforms as they react to tighter lending standards adopted by their banks.
So what is different? Well, the sense of doom and gloom of the last few years is less palpable. There is some evidence of pent up demand and in general, business owners are more upbeat about the availability of finance than they were a couple of years ago. Nevertheless, the markets are not the same as before and businesses that were order takers in pre-recession years must now move into selling mode.
So what should small and medium business owners do differently?
• First of all, carry out an analysis of how your business is performing in the here and now. You need to know exactly where the business is strong and where it is weak. Consider using the 28-point business health-check list shown in the Mind Map below.
• Focus on creating tangible value for each customer and cautiously push the boat out with existing and new customers as liquidity allows you to do so.
• Be aware of the Pareto Principle wherein 80% of your profit will come from 20% of your customers. Dump unprofitable customers if you have not already done so.
• Talk to more than one bank about financing as well as considering some of the newer forms of raising capital.
• Seek strategic alliances with key suppliers and other participants in your niche to strengthen your product offering and your business brand.
• If you have not already laid-off the weakest employees during the bad times, now is the time to make a decision to bolster your team performance by only hiring “A players” and encouraging poor performers to go work for someone else.
• Consider getting some outside help or external expertise to lift your game – you can rarely do it all on your own and the best of us still have some weaknesses.
So how do I choose the best external help? This is a tough question as the answer may be different for each business owner. However, the following guidelines are a good place to start.
The first thing to consider is who do you know within your extended network that might be able to help? A recommendation from someone you know and trust is a great place to start. Secondly, people do business with people they like so make sure you both like and trust anyone you are considering asking for help. Thirdly, don’t get hung up on the cost, focus on the value. Any external consultant/advisor/coach worth hiring will deliver savings or increased income that will more than pay for the investment you make in them. Finally, check them out properly whether they come recommended by someone you know or if they are complete strangers to you. Although your gut will be right in the vast majority of cases, small and medium businesses cannot afford to make the mistake of hiring the wrong person.