So your launch was a success, and your new business is now at cruising altitude. Celebrate, by all means. But keep an eye out for tendrils of smoke in the vents.
That’s because some problems in a growing business are like a smouldering fire: you’re often unaware until it’s too late. If you know their early warning signs, though, and have plans in place to counteract them, you shouldn’t be taken by surprise. Here are some of those signs and the best countermeasures:
1. You’re starting to pay your bills late
If you’re starting to having trouble paying creditors and employees on time, you might be developing major cash-flow woes. Cash is everything to your small business, and you need to figure out where the problem lies right away.
Ask yourself: Are you billing your clients quickly enough, with timely invoices? Are you checking the credit histories of your big customers instead of just giving them the benefit of the doubt? What about collections procedures for the deadbeats? Do you have those in place?
Cut costs wherever you can. The little expenses add up. Barter with other businesses for services; buy your equipment gently used; install a ‘smart’ thermostat; get a solar water heater; make staff turn off computers at night; employ freelancers for suitable tasks. You can even borrow items from a tool library so you don’t have to buy them.
Check your financial statements religiously. Identify any possible opportunities to boost your income, but don’t even think about trying to grow right now. If you’re having cash flow problems, now’s not the time.
You should be able to pay your bills, your employees, and even yourself–on time.
2. You’re always reacting to emergencies
If you’re starting to respond to business emergencies day in, day out, something’s not right.Things should be running smoothly enough to let you plan and think strategically much of the time, and focus on building your business.
Perhaps you’re trying to have the business do too many things at once; or maybe you’re bad at setting priorities and managing time.
The Eisenhower Matrix
Have you heard of the Eisenhower Matrix? It’s a formula developed by Dwight Eisenhower, the American World War II general, more than 60 years ago that has stood the test of time. Basically, Eisenhower split his workload into urgent tasks (returning a phone call from Winston Churchill, say) ) and important tasks (such as planning for D-Day)). He made sure to schedule time for his important tasks and to delegate the unimportant ones. What he accomplished with this approach is none too shabby: he vanquished Hitler, became president of the U.S. and developed its highway system, among other things. And his formula is still alive today.
Eisenhower didn’t even have the benefit of project management apps, but you do. These can help you and your staff work together efficiently. Eisenhower also knew that having too many meetings in one’s schedule is a bad idea — they suck up lots of time.
Be realistic about your own weaknesses, and consider hiring someone to help set priorities and establish your office systems.
3. The staff you just hired is leaving
Once you’ve invested in training good people, you want them to stick around. If
they’re leaving sooner than you’d like, schedule exit interviews with them to ask why. Then ask yourself what you can do to improve staff retention.
And take a look in the mirror. A good boss fosters enthusiasm, sets clear expectations, gives timely feedback and conveys a sense of mission. Then he or she gives the employees room to get the job done. If they do their jobs well, don’t micromanage.
Let your employees know you value their efforts (or at least, let the good ones know); pay them a decent wage; express an interest in them. They’ll reward you with loyalty.
If these strengths aren’t yours, consider hiring someone else to manage your staff. Outside consultants can also help identify why employees keep heading for the door.
Turnover rates vary by industry, so you might want to call your industry’s trade association, if there is one, to see how your rate compares.
4. You experience a sudden drop in sales
A sudden drop in sales could be just a hiccup, but it could also be a sign of bigger problems, so investigate immediately. Have your competitors beat you to the punch in some way? Is your product or your way of selling it outdated? Do you need to adjust your pricing or your marketing? If you have sales staff, are they hitting their quotas?
Are you targeting the right customers? Is technology revolutionising your industry in some way and changing your customers’ buying habits or methods?
Put yourself in your customer’s shoes and try searching for your product and business online. If you sell online, make sure everything on your website functions smoothly, from landing to checkout.
Check in with your industry’s trade association, if you have one, to find out if the drop you’re experiencing is part of a bigger trend, or perhaps customary at this time of year for reasons you might not have thought of.
Now you have it — four situations, each of which could be a wisp of smoke telling you your engine’s on fire. Ignore them at your peril.
Need some general tips on improving your small business’s health –especially when it comes to getting finance? This week, we have the pleasure of welcoming Bessie Hassan, who shares our drive to educate the market and help small businesses. As the Money Expert for finder.com.au – the site that compares virtually everything – Bessie is an experienced commentator who often appears on national radio, TV, and throughout online publications sharing her best money-saving tips and property advice. Bessie is passionate about empowering Australians to make better decisions, whatever it is they’re looking for.
Whether you’re an entrepreneur looking to start a new business from scratch or a seasoned owner wanting to expand your business offshore, you’re going to need some capital at some point. To get your hands on this extra dosh, it’s likely you’ll need to take out a business loan. In business, time is money and money is time, so it’s worth knowing a thing or two about how to apply for finance the right way.
Here are four ways to improve your chance of getting the “green light” for your business loan.
1. Check your credit health
Although we’re told to keep our business and personal lives separate, this rarely happens for business owners, as lenders often look at both your company and personal credit scores before lending you money. There’s no point applying for a business loan if you know you don’t have a great credit history (either personally or via your business). Being patient and working to improve your credit score before applying will give you a better chance of securing finance.
Your company’s credit score will be impacted by how long you’ve been in operation, your credit enquiries, Personal Property Security Register (PPSR) registrations and director information. You can improve your score by paying your bills on time, keeping balances low on credit cards and communicating with your creditors. Your personal applications for credit and accounts held in your name may also be checked to help the lender determine your risk profile. Being happy with your credit score and taking steps to improve it will put you in a strong position to begin your finance search.
2. Have a solid business plan
Lenders are most concerned about your ability to repay the loan over time. They’re not going to fork out and invest in your business if they doubt you’ll be profitable and successful in the future, so they’ll want to see proof-points that your business can stand the test of time.
A thorough business plan will make it easier for you to communicate your business vision, strategies and goals to lenders. Including information about how the money will be used and some cash flow projections will show you’re serious about your business and confident in your ability to repay the loan.
3. Know what type of loan you need
There are many different financing options available for businesses. To be eligible for most, you’ll need to have an Australian Business Number (ABN) and for some you’ll need to have been operating for a certain period of time (eg one year for most unsecured loans). You also might need to generate a minimum amount of annual turnover, which can range between $50,000 and $200,000 depending on the type of loan you’re going for. To decide which option to take, you’ll need to understand why you need the capital in the first place.
For example, if you need some additional funds to meet daily business expenses, you might want to take out a business credit card. Remember you’ll need to compare providers to score the lowest interest rate you can. If your expenses can fluctuate (maybe on days when you purchase stock) then consider a business overdraft account, which allows you to overdraw on your business account to a certain limit.
There’s no point approaching a lender for equipment finance if you’re just going to spend the money on inventory – it’s important to do your research so you apply for a product that will complement your needs.
4. Don’t leave it until the eleventh hour
All businesses need money to operate so if you’re short on cash, your business’s lifespan may also be short. If you know you’re going to need extra cash in the near future, start researching your loan options now! Approval for a loan can take anywhere between a few days and a few months, depending on the type of finance you’re applying for. It’s important to have some time up your sleeve so you’re not rushing the application and can wait out the approval process (without going bankrupt in the meantime).
When embarking on your search for finance, it’s important to practise due diligence to ensure you take out a loan that will suit your business needs. Understanding your credit history, having a solid business plan in place, researching your finance options and being prepared are simple ways to improve your chance of being approved so you can make your business vision a reality.
Financial System Review – click for the full report
Government should continue its current process to graduate the fundraising regime to facilitate securities-based crowdfunding. This would enable entities to make public offers of securities to a potentially large number of people (the ‘crowd’). The risks associated with crowdfunding investments would require some adjustments to consumer protections, including capping individuals’ investments and clearly communicating the risks.
Government should then use the policy settings for securities as a basis to assess wider fundraising and lending regulation to ensure it facilitates other forms of crowdfunding, including peer-to-peer lending.
A range of crowdfunding models are emerging globally. Crowdfunding facilitates the funding of projects or businesses, where small amounts of money are raised from the ‘crowd’ via an online facilitator (or platform).68 Financial crowdfunding models include:
- Securities-based crowdfunding, where the ‘crowd’ invests in an issuer in exchange for securities — either equity (crowd-sourced equity funding, CSEF) or debt.69
- Peer-to-peer lending, where an online intermediary facilitates lending between individuals, often in the form of unsecured personal loans, potentially to fund a business.70
- Graduate fundraising regulation to facilitate innovations in fundraising emerging from new technologies and ensure policy settings are consistent across funding methods.
- Provide firms, particularly small and medium-sized enterprises (SMEs), with additional funding options.
Article by Neil Slonim – Financial Reform Report released on 7 December 2014
If adopted, the financial reform recommendations made by the team headed up by businessman David Murray could usher in some of the biggest changes to Australia’s banking system in recent history.
The recommendations are broad, but the key ones impacting small business are those calling for super funds to drop their prices and the government to relax rules around governing crowdfunded equity.
The big banks will be required to hold much more common equity capital against their mortgage business if the inquiry’s recommendations are adopted, while financial planners would need to hold a relevant tertiary degree and be able to prove their competence in managing superannuation.
The inquiry has recommended a ban on self-managed super funds borrowing to buy assets and says the corporate regulator, the Australian Securities and Investments Commission, should be granted more power to crack down on white collar crime.
Numerous professional bodies expressed their support for the recommendations yesterday, including CPA Australia, whose chief executive Alex Malley said in a statement that the report “addresses some of the fundamental issues facing Australia’s financial system and signposts some of the critical work that needs to be done”.
“Recommendations for allowing the development of crowdfunding options for businesses to access, the establishment of a new ‘innovation collaboration’ and an emphasis on removing unnecessary regulatory impediments to innovation all have the potential to help business prosper,” said Malley.
However, SME banking expert Neil Slonim says that the 2.1 million small Australian businesses have missed out.
Slonim, who heads up advisory firm ‘The Banking Doctor’ told SmartCompany the report’s lack of specific recommendations relating to the SME banking sector is “disappointing”.
“There was really nothing specific in the 44 recommendations that related to SMEs and startups, other than a generic statement that the inquiry wants to encourage the development of crowdfunding and peer-to-peer lending, which would potentially give SMEs more funding options than they currently have,” says Slonim.
“But other than that, there is really very little if anything else in the inquiry that would give SMEs hope they would get better access to funding.”
Slonim says the two key banking issues facing SMEs are a lack of access to finance and the need for greater competition between the big four banks.
“The inquiry makes some recommendations that would level the playing field between the big four banks and smaller providers of mortgage finance, which will help the consumer sector, there is nothing similar for SMEs,” he says.
“There is a lack of genuine competition between the big four banks, which control more than 80% of the marketplace, in an environment in which it is very difficult for smaller players to compete for SME business.”
And while the Murray report recommends that the government extend protections from unfair contracts for SME loans, Slonim says that “assumes” small businesses are able to sign a contract with a lender in the first place.
Slonim believes it is likely the government will adopt most of the recommendations contained in the Murray report, but says there will be another period of consultation with Treasury before the government officially responds at the end of March 2015.
“Joe Hockey will now be lobbied by all and sundry, particularly the banks” he says.