24th January 2019
As a small business owner, the new calendar year creates the perfect opportunity for you to take stock and review your company’s trajectory and finances. This can help identify forthcoming cash gaps, potential cost savings, and provide a clearer picture of whether your business is meeting its medium and long-term ambitions.
This exercise is particularly crucial for 2019 as the UK is set to leave the European Union on 29th March. Businesses need to assess how potential changes may impact them, not just the challenges, but the opportunity to diversify and exporting to new international markets.
Forecast for the year ahead
Running out of cash is one of the most commonly cited reasons why companies fail. In fact, this is a major problem for fast-growing businesses, as they become over-stretched while attempting to service upfront costs for an expanding customer base. To overcome this, create an annual forecast to set goals for the year ahead, such as sales targets, and identify critical issues before they emerge.
Seasonality should also be taken into account. For example, for products which make great gifts, the bulk of sales may take place in the quarter leading up to Christmas. This may require the stock to be purchased upfront in the quarter prior, ready to meet customer demand.
It is best practice to create a 12-month forecast, then re-forecast on a quarterly basis, depending on how the year to date has gone so far. If you use a cloud accounting software package, you should be able to upload your forecasts to generate a report that blends the year to date figures with your predicted ones.
Finance new activity and projects
Developing new products and opening additional offices or outlets requires significant investment. This usually requires a new source of finance-- cash reserves and working capital are often not sufficient for such large, future-focused projects. Therefore, plan for the year ahead by looking at your product development roadmap to quantify and identify when you are likely to need any new sources of funding.
Using a peer-to-peer crowdfunding platform, such as Crowd2Fund, has many benefits for SMEs: it does not only have comprehensive, bespoke financial products, but you will gain a campaign that can double as marketing content. For example, raises are a fantastic opportunity for press coverage to celebrate your growth. Consumer businesses, in particular, can benefit from both existing patrons and a Crowd2Fund investor community participating in the funding round by converting them into brand advocates, personally invested in your success. Uniquely to Crowd2Fund, you can even offer rewards to entice investors and let them sample your products.
Identify cost savings
Reviewing your finances from the prior year can help identify cost savings, which can subsequently ease up working capital and increase the profitability of your business. For example, talk to key suppliers to see if they can offer discounts for loyalty, or bulk orders for a commitment to increasing purchases as your business continues to grow.
A quick win is to renegotiate phone contracts, business insurance, and energy. Take an hour or two to search price comparison sites for business, such as Make It Cheaper or Love Energy, which can generate a saving of thousands.
Get ready for Brexit
With almost two months to go to Brexit, use the New Year to ensure you are adequately prepared for both associated risks and opportunities. Supply chains should be reviewed in order to understand the potential impact of a slow-down in the supply of goods and increased administration.
In some instances, businesses may choose to switch suppliers from EU-based to UK-based, in order to minimise disruption. B2B enterprises should also engage in wider discussions with their overall supply chain, in order to understand potential disruptions experienced by their key customers.
However, there may be opportunities to sell to new overseas markets, due to the volatility of the pound making UK products cheaper. Businesses should research the Department of Trade’s (DIT) Great.gov.uk website to explore new potential markets which may be suitable post-Brexit.
To conclude, the New Year presents an opportunity to set and track your business goals. Brexit and the year ahead does not have to equal uncertainty: learn from your growth in 2018 and get ahead of the game for 2019. If you follow our tips, your long-term ambitions will be far more attainable.
