IS IT RAIN OR SHINE FOR SMALL BUSINESSES?

November 23rd, 2012

It’s easy in these fragile economic times to assume that things are bleak on the horizon for small businesses. We’re all so used to talking about “the recession”, “the downturn”, “cuts” and “austerity measures” that it’s become ingrained in the collective consciousness.

A ray of sunshine then, that according to a recent international study, despite businesses being negative about the prospects of their local economies, they largely remained positive about their own business prospects.

The International Business Index Survey [1] is a worldwide study of small to medium sized businesses and in the September 2012 study, asked businesses scored their confidence, on a scale where “More confident” is a score of  (75)”, “No different is (50)” and “Less confident is (25)”

UK businesses were the most confident in Europe about their prospects over the next six months (58.46), recording their highest confidence levels since the Business Index began in 2011. Elsewhere in Europe, France (45.55), Spain (48.12) and Portugal (41.06) were the only three countries registering a score below the 50 mark. Although Germany’s confidence levels have consistently dropped from in the last year, they still registered positively at 57.81.

Outside Europe, Brazil is the most confident with 70.31, followed by Malaysia with 67.2 and South Africa with 64.19.The US and Canada are both more confident than last year. The US rose from 53.65 to 60.28, and Canada from 55.08 to 61.07.

Smaller businesses tend to be less confident however, than larger ones. Confidence rises from 55.65 amongst single person companies to 64.49 amongst companies with over 1000 people.

In other research from the Open University [2], UK SME’s anticipated an improvement in their sales performance in the second quarter of this year. Although to be clear, the reason for the improvement in sales performance is that fewer firms expect their sales to fall, rather than because more firms expect them to rise.

Wholesalers have the greatest confidence. 30% were expecting an increase in sales in quarter 2 this year, compared to last year. It’s heartening to see 21% of manufacturing SMEs expecting a sales increase alongside Health, Education & Leisure sectors. Hotels & restaurants are hopeful of a turnaround while retailers expect their modest recovery to continue. Small construction firms still expect sales and employment to fall, but not at as fast a rate as in the first quarter.

It’s a different story for UK small businesses however, if you look at the latest report for Quarter 3 2012 from the Federation of Small Businesses [3].

Their “Voice of small business index” panel were asked in this current quarter about their prospects for the next 3 months and the scores have dropped 5.8 points to a reading of minus 4.5. Their report also shows revenues falling with 6.5% seeing turnover fall in the three months prior to the survey and 16.6% anticipating falling profits in the three months ahead.

Despite this business service sectors continue to perform well and small manufacturers are also looking to do better business in the coming three months. Also 50.6% are looking to grow over the coming 12 months.

So it’s a mixed picture from where I’m sitting. What are you finding? Do you feel your business is turning a corner or are you still cautious?

 

Refs:

[1] Sage Business Index, International Business Insights, Sept 2012

[2] The Open University Business School, Quarterly Survey of Business in Britain, Quarter 2,  2012

[3] Federation of Small Businesses, Voice of Small Business Index, Quarter 3, 2012

Tips For Surviving Hard Times

November 15th, 2012

It can be hard to face up to the fact that the business you have put your heart and soul into, is struggling financially.  The good news is that there are several ways of improving the situation, so the sooner you acknowledge financial problems, the sooner you can take positive steps to get you back on track.

 

Here are some tips that will set you off on the right path …

 

REDUCE YOUR EXPENDITURE

  • Are there any savings you could make on your expenditure?
  • Cut any non-essential outgoings and if you have outstanding bills that you are struggling to pay to suppliers or banks, talk to them. You may be able to negotiate a more realistic repayment arrangement.
  • Could you find suppliers with more competitive rates? Often your existing suppliers will reduce their rates to keep your custom if you find a rival company with a lower price. Price comparison websites can save time if you want to shop around. Or ask around for recommendations or good deals.
  • Are there more creative ways you can promote your business for less money? There’s a great article here with 30 free ideas to get you started…

 

INCREASE YOUR INCOME

  • Is the recession effecting your income? If people have less spending power, could you introduce free offers, discounts or reward schemes that would represent good value for money and could lead to further income
  • If customers have less money in their pockets, would they be more willing to carry on buying if you offered a cheaper version of your product or service? It’s well known that in times of recession lipstick sales go up. The chairman of beauty firm Estee Lauder called it the “lipstick index” and recent research(1) shows that nail polish is now the affordable luxury that has a boom in sales in times of austerity. The logic is that women consumers turn to smaller items to brighten up their wardrobe and give them the “feel good” factor in cash-strapped times.  What could your “nail polish” equivalent be?
  • Work out which of your good or services have the highest profit margin and focus on promoting those.

 

MARKET RESEARCH

Make it your business to find out why times are hard for your company. For example, if the number of your sales has reduced, why is that? Is there a change in trends happening? Is there a new competitor on the block or virtual block? Has an existing competitor reduced their prices? This is a good time to have another look at your USP. Do you or can you do something better than your competitors and promote that fact in your publicity?

 

GET ADVICE

Do seek professional advice especially if you think you’ve already explored several possibilities without luck. Your local small business support centre has a wealth of experience and resources to address exactly the situation you’re in.  You can bet you’re not the only one asking their advice and you may also make some beneficial new contacts while you’re there.

 

What tips do you have for others who may be struggling?

Diversifying? 3 Things To Think About

November 15th, 2012

At start-up, many businesses are based on just one product or service or customer. This may serve you well in the beginning but as time goes on, customer tastes and needs may change, markets may dry up or competitors may encroach on your business. These things are a fact of life where business is concerned and it is just as well to be thinking about how you might create other sources of income when (rather than if) these things happen. Or, to reference a familiar phrase – Diversify or Die!

So what do we mean by a diversified business? “A company that has many products and services serving several markets” (1).  For example, in my local rural area farm diversification is not uncommon. One farm has developed a popular children’s adventure park and petting zoo. Another is offering upmarket “back to nature” camping retreats.

Things you need to consider when planning your diversification strategy are :

1. Your Ideas

Which direction will your diversification take you? There are two ways of thinking about this. Firstly, you could broaden the market for your EXISTING service or product. This means taking WHAT YOU ALREADY DO & giving added value or offering the next stage of product or service. Is there a segment of the market that you are not currently reaching that you could appeal to? How could you adapt what you’re offering to attract them? An example of this would be the purple tomato ketchup that Heinz developed to appeal specifically to children who like their food to be fun.

Secondly, you could think about a COMPLETELY NEW PRODUCT OR SERVICE that would complement what you’re already doing.  Something that might be related to what you currently do and would be of interest to existing customers. An example of this would be Enterprise car hire diversifying into car sales.

 

2. Your Resources

  • Realistically how much extra time and money do you have to put into this new idea?
  • Can existing staff contribute or will it require new staff or contractors with new skills?
  • How can you maximise your existing resources ie. contacts, expertise, reputation?
  • What steps do you need to take to ensure that the current business is maintained while energies are channelled into the new venture?

 

3. Your Brand        

How well does your new idea fit with what your company is currently offering? Does it fit with your values, your unique selling point?

Involve your staff, friends and family in the discussions to get the ideas flowing. The more input the better. And don’t rule out ideas too quickly. Sometimes the off-the-wall ideas may just be winners. Take the example of the million dollar business Doggles, who manufacture eyewear for dogs. Now diversifying their business by producing additional accessories for animals including Backpacks, Flotation Jackets, T Shirts, Caps, and Toys.  Not to be sniffed at!

 

Refs: 1) Dictionary of Business Terms, Barron’s Educational Series

Why It Pays To Know Your Weaknesses

November 13th, 2012

If you think you’re good at everything in your business, you might be wasting valuable time and money.

If you run your own company, it makes good business sense to know both your strengths and your weaknesses. I expect many of us are familiar with our strengths, as it’s likely that we’ve built our businesses around our own knowledge and skills. But we’re less accustomed in business, to dwelling on our weaknesses.

But knowing the gaps in our capabilities allows us to identify those tasks that we could outsource to others and get done quicker, better and often cheaper than we could do it. For example, spending days on end reading up on a new subject and trying to learn new skills might not be the best use of your time. It will take you away from the core of your business and if you’re attempting a skilled task such as graphic design or copywriting, chances are the quality will not be as good as buying in the services of a professional.

A recent survey by www.elance.com (a platform for online freelancers) found that 73% percent of small businesses are hiring more online contractors in 2012; 84% say that hiring online contractors provides an edge over competitors and respondents predict 54% of their workforce will be online within five years.

There are many freelancers out there covering a wide range of services including marketing, IT, project management, HR, web design, legal advice, graphic design & management consultancy. If your business takes you out and about or you don’t want the commitment or overheads of an office, there are also companies that offer a phone answering service for your “virtual office”.

www.pcg.org.uk – a not-for-profit association for freelancers in the UK – provides helpful resources for businesses considering outsourcing. This includes advice on setting up and managing engagements plus sample freelance contracts.  They provide this helpful checklist when deciding whether tasks are most suited to employees or contractors. It is important to check your legal and tax obligations when considering hiring in-house or externally.

Employees Freelancers / contractors
When to use them For ongoing and permanent work, and when you wish to control how the work is carried out. When to use them For projects or work of a limited duration, when you need skills you don’t have in-house and when you want the worker to use their professional judgment in doing the work.
Working practices It is common for employers to provide employees with all the necessary equipment and facilities they will need to carry out their duties. Working practices Even though they may spend a lot of time on your premises while carrying out their work for you, most contractors will not wish to be integrated into your workforce to any great extent.
Obligations Employees are entitled to employment rights including sick pay, holiday pay, parental leave and protection from dismissal; some apply after certain lengths of service. You will also need to consider pension contributions, employer’s NICs and insurances. Obligations You will not have to pay any National Insurance Contributions, holiday pay or any other employment benefits to a contractor: they will take care of all of this themselves.
Contracts Employees are engaged using a contract of service, under which the employee agrees to perform work themselves and as you instruct them. Contracts Contractors work under contracts for services, under which they agree to provide services to your company.

Keeping Staff Motivated On A Budget

November 9th, 2012

It goes without saying that whatever the size of your business, it’s important to keep your staff feeling good about working for you.

 

A Families & Work Institute study in USA showed that earnings have only got a 2% (two percent) impact on job satisfaction, while job quality and workplace support have a combined 70% (seventy) impact.

 

These are striking statistics, let’s just reinforce that with a pie chart!

 

Another recent study by Gallup found that organ isations where employees have above average satisfaction have

  • 38% higher customer satisfaction scores
  • 22% higher productivity
  • 27% higher profits.

 

Raising or maintaining staff morale can help the retention of staff, reduce absenteeism, improve performance, boost productivity and help create a positive and creative work environment. So how do businesses keep their staff happy? Well larger companies often pay other companies to manage their staff reward schemes . Staff are awarded “points” & then choose big name brand gifts from catalogues. Other companies offer their staff vouchers for things like childcare, savings on the weekly shopping, reduced priced smart phones, bike to work schemes, discounted holidays or cinema outings.

Another approach is to offer health based incentives such as gym membership, healthcare and  critical illness cover. Then there are common perks such as company cars and profit related bonuses.

But what if you’re a smaller business? Staff incentives don’t have to cost an arm and a leg. Here are some ideas to keep your staff smiling that don’t cost the earth:

1. A small one-off gift can be effective as a mark of appreciation especially if staff aren’t expecting it.

 

2. Company trips or meals can be something to look forward to and allows people to get to know each other in a non work setting.

 

3. Shutting the office a couple of hours early before a bank hol or once in a while on a Friday can really lift the spirits.

 

4. Allowing time off occasionally for national or sporting events.

 

5. Involve staff by asking for their feedback & ideas. Not just about what incentives they’d like but seek their views about the business in general. Their alternative points of view can be invaluable and they will appreciate being asked.

 

6. Find ways of acknowledging employees’ efforts. This can be through regular formal appraisals highlighting successes and areas for development, or more informal verbal feedback when a job is done well.

 

7. Start as you mean to go on. Before new staff start, you could send them a “welcome” pack outlining company values & structure, their induction schedule and maybe the contact details of a work “Buddy” who is available to support them.

 

8. And let’s not forget a simple “thank you”. It’s sometimes forgotten about but it has a great impact and it’s free!

 

So THANK YOU for reading!

 

 

The Guilty Style of Management?

November 7th, 2012

This week, I heard on the radio about research that says guilty managers are the best managers. Sounds intriguing doesn’t it? What have these managers been up to that they should feel guilty? How could it possibly make them better managers? Well it certainly got my interest. Looking behind the attention-grabbing headline, the research from Stanford Graduate School of Business (ref. 1) finds that people who are prone to guilt tend to work harder and perform better than people who are not guilt-prone. They also carry a strong sense of responsibility for their own actions and are perceived to be more capable leaders.

In group tasks, the more guilt-prone people seemed to the rest of the group to be making more of an effort than others to ensure everyone’s voice was being heard, to lead the discussion, and generally to take charge.

I would imagine that a manager who feels responsibility towards others would be more inclined to take on board the ideas and views of staff. This might lead to higher morale and job satisfaction for employees. It would also have a positive economic impact on the business with higher productivity, increased opportunities for creative development, a lower turnover of staff and therefore fewer resources spent on recruitment.

This research seemed like a breath of fresh air to me. I have often thought that the stereo-typical view of a good manager being hard and ruthless is a bit limiting. I’m sure there are countless people out there doing a great job of running businesses that don’t fit into the traditional autocratic styles of leadership.

There are many different styles of management but it’s generally accepted that they fall into the following 3 broad categories:

The Autocratic Manager retains strict control by making decisions without regard to the views or contributions of employees.

The Paternalistic Manager is still making the decisions and firmly in charge but as its name suggests behaves more as a “father-figure” giving consideration to what is in the best interests of the employees.

The Democratic Manager gives employees a greater input and responsibility for decision making and including how tasks are carried out.

I’m a big fan of the Management by Walking Around (MBWA) technique where you regularly talk to your staff about what’s happening from their point of view. I like its informality and it can give an indication of levels of morale and an opportunity to respond to any ideas and concerns early on. I’m wondering though how many managers actually sit down and plan what their management style will be? Do you consider the tasks at hand and which style would be most appropriate? I know I’ve never “planned” my own management style, it has just happened as an extension of my personality. And styles can be changed and adapted according to the situation or the personality of the person you are having the dialogue with. I’m guessing that for most of us, our management style will be a fluid combination of many different styles.

How would you describe your style?

Ref 1. Schaumberg, R., & Flynn, F. In press.  Uneasy lies the head that wears a crown: The link between guilt-proneness and leadership. Journal of Personality and Social Psychology