Emily Coltman ACA, Chief Accountant to FreeAgent, examines how you can set the right foundations to ensure your business enjoys a lengthy reign at the top.
The UK is currently in the middle of celebrations for the Diamond Jubilee, which mark Queen Elizabeth II’s milestone of reigning as monarch for an astonishing 60 years.
It’s a remarkable act of longevity; not just for a head of state, but for any sector – including the business world. After all, it’s generally accepted that the majority of small businesses in the UK end up closing within 5 years of starting up, so how do you make sure yours is one of the resilient ventures that survive? How can you ensure that, like the Queen, your business stands the test of time?
Keep up with the market
If your business is in an area where tastes and fashions change rapidly, such as jewellery or clothing, or in a sphere where technology evolves faster than you can blink, such as mobile phones, then you’ll need to make sure you don’t fall behind the times.
Keep innovating, keep looking for the next direction, and don’t cling to last year’s technology in the hope that this year’s won’t work. Look how cassettes declined in popularity when first CDs, and then iTunes, emerged. Remember you have to adapt and evolve if you want to have long-lasting success.
Keep up with – or ahead of – the competition
It’s also very important to watch what your competitors are doing, to see whether you might need to change your plans so as not to fall behind – and to keep an eye out for any new competitors coming into your market space.
For example, if you’re a cake-maker, and your neighbour starts selling muffins made with her own home-grown blackcurrants at a stall on your local farmer’s market, what can you do to make sure you don’t lose customers? Could you direct some of your resources into creating similar goods to compete with hers directly? Or is there something else you can do to maintain your share of the market?
Build good relationships
One option to the scenario above could be suggesting you go into partnership together. You could propose making muffins using your neighbour’s blackcurrants but with your industrial baking equipment – and split the profits between you.
Building good relationships like this – whether they are with your customers, colleagues, suppliers and even your competitors – is a great way to make sure your business stays alive and well.
Many accountants hold by the belief that there are more than enough clients for everyone, and will refer clients to each other. For example, I knew one accountant who worked on her own, which she felt made her better suited to working with small businesses – but if a larger business approached her, she would refer them on to a local firm of accountants with 20 staff.
The business would have an accountant more experienced in dealing with a business of their size, and the relationship between the two firms of accountants would be strengthened.
Plan your cashflow carefully
Many small businesses fail because they run out of cash. Don’t let that happen to you.
Plan how much money your business will have coming in, and how much it’s going to need to spend. You will be very surprised how all the little costs mount up when you start adding them together, so good forward planning is vital in ensuring you don’t let them spiral out of control.
Small business owners often struggle to commit the time to plan and monitor their cash flow properly, as they are concerned with the actual day-to-day running of their business. However, while it’s tempting to plough ahead with promoting your services and taking new orders, it’s vital to have all of your financial projections and strategies completed first, to ensure your business is as profitable as possible.
It’s also easy to let your customers get away with not paying you, or paying you late. Don’t fall into this trap! The success of your business is dependent on receiving payment for the services or goods it provides, so make sure all of your customers understand that they have to pay you quickly. Chase them up if they do not pay you on time.
Don’t upset HM Revenue
Keep track of when your tax forms have to be filed, and make sure you get them in on time – and pay all your tax when it’s due.
Otherwise you could find yourself having to pay interest and penalties that can ultimately add up to be as much as your tax bill itself – effectively, like the wonderful old Ronnie Barker song, making you pay your tax twice!
If it helps, put money aside in a separate bank account so that you have the money available to pay your tax bills.
There are no guarantees in business but there are steps you can take to try and make sure your business stands the test of time!
Emily Coltman ACA is Chief Accountant to FreeAgent, who provide an award-winning online accounting system designed to meet the needs of small businesses and freelancers. Try it for free at www.freeagent.com
Picture credit: Simon Howden and www.freedigitalphotos.net