24 July 2018
In part one of this blog we examined the obstacles that are put in the way of business by politics, world events, government regulations and other factors that we cannot predict or control. However, many of the challenges in business come from within, just the familiar problems of finding new customers, inventing new products or services, recruiting and retaining staff, managing the cash flow, and others. Here are a few thoughts on business challenges.
Britain’s small and medium-sized businesses, in particular the family-owned ones, have come in for quite a lot of criticism lately. The ONS has published statistics that are claimed to show that family businesses are largely to blame for the UK’s poor productivity rate. There is no doubt that British business needs raise its game. See our blog of 15 December 2017.
The first challenge is leadership, one of those difficult-to-define qualities that is nevertheless easily recognisable when you see it. It occurs naturally in some; others have to learn it. In business this has to start with an in-depth knowledge of your product or service, an excellent understanding of your market and customers and a clear vision of what you want to achieve. You also need the ability to get your team to buy in to that vision. Your business will then reflect your values, your ideals and your ambitions. Your team will demonstrate these vales when dealing with your customers and suppliers, and you will have established a recognisable culture – ‘this is the way we do it here’.
So, the second challenge is to devise and implement a strategy. There is a common misconception that a business plan has to be long and complicated. Certainly, the kind of financial projection usually required by lenders can be complex, but our experience is that this sort of plan is often put away and never consulted once the required finance is in place. For most small and medium-sized businesses it is possible to write a business plan on one page. This needs to begin by stating your objectives very clearly, preferably with a time-frame within which these objectives are to be achieved. It should also identify a few intermediate points or ‘milestones’.
Of course, no strategy will work unless you understand exactly how your business works and are able to reduce this into a few Key Performance Indicators (KPIs). These should be stated clearly on the plan and checked regularly against actual performance measured by your management accounts.
From this we can see that the third challenge is measuring performance. Annual accounts have limited use. Most SMEs now have good computerised accounting systems; many are now using cloud accounting. Your accounting system should measure and report your KPIs at least on a monthly basis.
Building your team
Your business is only as good as its people. The fourth challenge is building your team – and keeping it together. It is often said that you should recruit for attitude and train for skills. In an era of skill-gaps this is truer than ever, but obviously will take time. However, there will be occasions when recruiting an experienced individual is necessary to make a step change. Many businesses do not invest enough in their people; this is illustrated by the poor take-up of the government’s apprenticeship scheme. You will already know that a well-trained team that shares your business vision can achieve great things. So, you should involve them and discuss your business plan with them. If everyone knows the direction of travel, there is a good chance of getting there.
The fifth challenge is to have properly formulated and documented systems for all of your processes. These form a basis for training your team and they encourage consistency in your products and services. But they should not be set in stone. Be prepared to adapt them to accommodate new ideas offered by your team and your customers.
Finally, perhaps the biggest challenge of all is implementation. One of the greatest barriers to progress, the reason why businesses fail to grow, and eventually wither and die, is that owners and managers start out with brilliant ideas and write practical strategies, but then they get overwhelmed by the immediate problems of daily business life. They lose sight of that business vision. They fail to check progress against the agreed objectives. Their teams become disillusioned and find other jobs; sometimes the customers desert them also. This is known as FTI or ‘Failure to implement’.
All of these challenges can be dealt with, but sometimes being a business owner can feel a bit lonely. A sympathetic external adviser is an essential member of your team. Someone who can help you to formulate your objectives and support you when you suffer from FTI. That is what we love to do at UHY. Please give me a call if you would like me to help you make your business even more successful.
For further information about any of these topics, please speak to one of our accountants in Newcastle, Jarrow or Sunderland.
As one of the leading firms of accountants in the North East, with offices in Newcastle, Sunderland and Jarrow, we have the expertise to advise you on a wide range of tax related issues. If you would like to speak to one of our local experts, please contact us.