It’s no secret that times have been tough for small businesses in recent years. Between pandemics, the cost-of-living crisis and the tough UK economy, it may have felt anything from tough to downright miserable.
A report released in 2023, titled The Economy 2030 Inquiry, actually highlights that, as a country, we’ve experienced low growth and productivity as a whole for around 15 years, starting with the Financial Crisis in the late 00’s and early 10’s.
While it’s nice to feel vindicated, in that it’s not just you feeling like it’s a bit of a slog at the minute, and a bit difficult – how does that help? The everyday business owner can have little effect on governmental policies, and the country’s economy strategies.
Well, let’s not worry about all the things we can’t affect and control. Let’s talk about what is within your control to affect, as a small business owner – and that’s your own business! It’s how you react to these tough economic times – and it’s how you win in them!
Here’s 10 ways to win in your business, during a stagnant economy.
When the media is all doom and gloom, and finances feel tough across the nation, the first instinct can often be to panic. Don’t.
Panic can cause the exact opposite of what you’re trying to achieve, and becoming a self fulfilling prophecy of doom and gloom.
If you have employees, this can send them spiralling, affecting the productivity of your company. This can also be felt as far afield as your customers, depending on what it is you do. And the last thing you want, or need, is your panic to rub off on them and they stop spending with you.
Stay calm! And carry on, as they say. Back to business basics…
Part of going back to basics is reviewing your business plan. (You should have one of these, and if not, why not?! Make one!).
You need to review your current strategies and ways of working, so you can stay fit, lean and agile in your business.
How will you ‘batten down the hatches’ in the most positive ways? How will you continue to service your customers to the best of your abilities, despite the tough economic times?
Will you pivot, adjust or tweak your business model? Innovation keeps a business fresh, and customers coming back.
Will you source newer, more economically advantageous ways of working? Suppliers, materials, technology?
Or, do you simply need to carry on calmly as you are, while throwing your arms around your customers, so they feel loved and keep coming back to you? It could be as simple as communication.
Anticipate changes in the market you operate in, with your Plan, before they happen. Then, get in front of them, so you can remain servicing your customers the best you can.
Your business plan is the bible of how your business operates, now and into the future. This should be reviewed regularly, even when economic times aren’t tough, so you can ensure success in your business.
Just being a backwards looking business, always reacting after the fact, or knee-jerking suddenly to situations as they arise, won’t help you navigate tough times. Plan your way through it.
Make Your Profit & Loss Account Work for You
You always need an excellent handle on the Profit and Loss Account, and in tough economic times, this is no exception!
Review your Profit and Loss Account and see where you can save money. Make sure you’re saving money in the right places!
You might want to re-negotiate with existing suppliers for better prices. You might want to shop around for different suppliers that can provide you the product or service for a better price altogether. You might want to cut some costs that are unnecessary.
You’ll definitely want to review your IT spend and ensure any subscriptions or licences are being used fully – and cancel anything that isn’t.
You will want to optimise the efficiency throughout your business. Efficiency drives profit!
This might be looking at your systems and processes, and streamlining them so you can do everything you’re already doing, but you can do more of it. You might want to investigate new IT solutions, so rather than 3 subscriptions to 3 different software solutions, you find one that does everything you need.
Invest in Marketing and Sales
When you review your Profit and Loss Account, and look to cut costs, some of the first costs that always gets cut are those relating to marketing and sales. This isn’t always the best thing for your business, both short term and long term.
Short-term, your competitors are likely to be doing the same as you and cutting costs, which leaves the market somewhat open to win new customers, while they’re not being as effective at it.
Long-term, you remain visible and keep at the forefront of your customers’ minds – whether existing or new. Plus, it takes a long while for marketing traction, in particular, to build back up again.
Now it’s not to say you shouldn’t review your marketing and sales spend, to ensure you’re spending money on the right things that are driving a return for you, and cut ones that aren’t making a return. This is something you should definitely do!
You should also look to having a cost-effective marketing and sales budget, that’s manageable and affordable for your business, when times are tough. This means you might need to trim the existing spend, even if it does generate you a return. If you can’t afford it all, you need to be frugal.
Review all your marketing and sales spend, and keep what’s working and that you can afford. The rest is just noise and expense.
Definitely don’t cut it out completely though! It is proven that, during recessions, pandemics and tough economic times, those companies that continue to invest in marketing and sales not only win through the tough times, but also win when those times turn around and become more positive again too.
Cash reserves, your stock of cash you have saved for a rainy day, becomes key in tough economic times. Make sure you utilise this cash to the best of your abilities, so you can stretch it as far as it can go.
This comes down to good Profit and Loss and Cash Flow forecasting.
Plot your sales and costs, and therefore the profit you expect to make. And plot the cash timings of those sales and costs as well, so you can ensure your financial plan is going to work and see you through.
Hopefully you have cash reserves you can optimise. If not, the next one is going to be one to help you!
Effective Balance Sheet Control
The Balance Sheet of your business shows everything you own – assets like computers and vans – as well as cash and things like inventory and outstanding customer invoices that can be converted to cash. It also shows everything you owe to other people too, like suppliers, HMRC, bank loans, etc.
Managing these areas in tough economic times are key.
How much stock are you holding, and how much is it costing you to hold it? Selling off surplus stock brings in cash. Discounting slow moving items to get them off your stock list can bring in cash, as can promotions. The cash injection will help your cash reserves tick over longer.
Collecting outstanding customer payments for overdue invoices is a cash injection into your business. Work through your cash collection process, to ensure you have no old debts hanging around – that’s money that could be in your account, for sales your customer has, essentially, had for free until they’ve paid!
Work through each aspect of your Balance Sheet to ensure you wring out any cash that’s yours, that you aren’t paying for anything unnecessarily and plan anything else you may need to, such as equipment purchases, for the most opportune time.
Avoid Fines, Interest and Penalties
Where possible avoid fines, interest and penalties for not paying for things on time.
When times are tough, one of the first instincts is to stop paying things. This can have a negative impact on your business though, as you may incur fines, interest and penalties for not paying that thing.
HMRC is a big one of these. It’s often easiest to not pay HMRC first. Sometimes this is absolutely necessary, because your cash flow may get tight. However, there are ways to best manage this sort of thing, to minimise the negative impact on your business.
With HMRC in particular, there is the facility to arrange a payment plan with them, if you’re struggling to pay taxes owed. The interest on late payments where a payment plan is in place is significantly lower than if you don’t have an agreement in place. As are the penalties.
Don’t just ostrich approach it, and bury your head in the sand. Have a conversation and make a plan to make the payments. It will be better for your business in the long run, if you do.
Customers are Key
Prioritise your customers. This ties in with themes across many of these points, but here it’s highlighted as its own point to help you have a considered think about this.
The saying goes ‘the customer is always right’. Your customers don’t actually care about your bottom line, how much profit you’re making or how comfortable or uncomfortable your cash flow is. Therefore, whatever action you take, whether you’re cutting costs, or pivoting your approach, you need to consider your customers and how it will affect them.
If you can get a much cheaper material to make your product, for example, but it would make it an inferior product and your customers are paying for a top notch, quality product – that’s a strategy that won’t fly.
Attracting new customers to you is far more expensive than retaining and maintaining your existing ones.
Therefore, it’s best to have your customers and their best interests in relation to your business and sales in mind, when you’re looking at any points in this list.
Keep an eye on your competitors. Monitor their pricing strategies, and marketing strategies, so you can keep ahead of them.
Your competitors’ strategies could have a knock-on impact to your own. Make sure you keep an eye on what they’re doing, so you can navigate what’s best for your business, and you can stay ahead of your competition.
Plan for the Future
Plan for the future. You always want to be ahead of the curve – a leader in your business, not a follower.
Economic struggles don’t remain forever – how will you come out kicking when there’s an upturn again?
Will you need people, freelancers, more equipment, the next big IT software package.
Whatever you do, and how you do it, will lead into how you do it in the future. Make sure you plan for this!
What goes down always comes back up again – it will get better, and things won’t stay feeling tough forever. Plan for this, so when it happens, you’re ahead of the curve and can handle whatever comes next.
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