Recent years have held a lot of uncertainty for small and medium-sized enterprises (SMEs) and independent businesses. While there are signs of recovery, SMEs have seen slow growth in recent months.
However, with employment increasing at a faster pace than in large firms, small businesses can protect themselves against sluggish growth.
Here’s what you need to know about sustaining growth for SMEs during periods of uncertainty.
These are some of the most effective strategies to keep SMEs growing at a steady pace and prevent downturns:
- Financial planning and budgeting – With a robust financial plan and budget, you can identify areas that need investment and areas that can be managed with cost-cutting measures. Your financial plan should outline your business goals, both short-term and long-term, and allocate resources accordingly.
- Diversification – If your primary offerings are facing a decrease in demand, you might want to consider diversifying your product range or service line to help attract new customers or additional sales.
- Invest in talent – The most successful businesses, particularly fledgling enterprises, invest in the right people. The news that SME employment has risen is a clear sign that businesses are investing, even when growth has slowed.
- Market Research – Identifying trends, customer preferences and the activities of your competition will help you to position and market your products or services effectively.
Avoiding the stall
A positive outlook that focuses on growth will put your business in a strong position to weather a slowdown.
But you should also keep in mind the most common pitfalls that impact SMEs, including how to avoid them:
- Overextension: While ambition is good, taking on more than you can manage can result in failure. Each new product line or market segment should be carefully considered and well-planned.
- Ignoring cash flow: Rapid expansion can lead to cash flow problems. Even if the business is profitable on paper, you may find yourself struggling to cover operational costs. You should keep a cash reserve and continuously monitor your cash flow.
- Neglecting existing customers: Within your strategy to acquire new customers, don’t forget your existing ones. Customer retention is often more cost-effective than customer acquisition.
- Mismanaging debt: While taking on some debt – usually in the form of a business loan – can fuel growth, poor debt management or loans with very high interest rates can affect your profit and cashflow.
Taking control of your business finances
We recommend that you seek guidance from an experienced professional to support your business through uncertainty.
Our team is skilled in a wide range of financial advice for businesses, with sector specific experts on hand for SMEs.