By Darren Upson, Director of Small Business EMEA, Xero
How do you build a strong business in a weak economy?
It’s a difficult question, but one that has become increasingly relevant. South Africa’s vibrant small business community is holding up the nation’s GDP, and is crucial to employment levels and tax revenue. Instability is very bad for business: when it takes a hit, everyone suffers.
The current political and economic climate has brought with it uncertainty amongst small businesses. Xero’s 2017 State of Small Business Report revealed that 68% of entrepreneurs believe economic volatility to be their biggest business challenge, while some 62% believe they have seen diminishing consumer demand in the past year.
Despite this, there is some optimism with 45% of these entrepreneurs hopeful that their performance will stay the same over the next year, and 40% are confident enough to predict growth. While this optimism is a good sign, it cannot become reality without action. In a fragile economy, businesses must take decisive steps to secure their futures.
Here are the three pillars of an economy-proof company.
Cost-cutting is often the first step businesses take in an adverse economy, and it’s not hard to see why. Minimising unnecessary expenditure is vital to any small business hoping to navigate these choppy waters.
A clear priority for businesses should be identifying necessary and unnecessary costs. Which outgoings can be cut? Which subscriptions cost too much money? Which departments are spending too much on office equipment? When you know where resources have been improperly allocated, you can ensure they’re properly allocated in future. Online accounting software such as Xero can help you spot any problem areas in cashflow and financial administration – so if you leverage the insights this technology provides, the process will be greatly simplified.
Minimising costs is just one part of the efficient financial management puzzle. A truly economy-proof financial strategy will ensure that all the investments you make in the future are practical, wise, and likely to yield a good return.
When you have achieved full transparency into company finances, you’ll have a better idea of where you should and should not allocate resources. If a marketing automation tool is likely to generate enough profitable leads to offset its monthly subscription cost, it’s worth investing in. If you can’t establish this return on investment, then it’s just not worth it. Again, cloud technology can help you decide where to invest these vital funds.
Time is money: the more you waste, the less efficient – and less profitable – your business will be. Make the most of your employees’ productivity and processes and you’ll be well-placed to thrive in any economic climate.
Employee time is often occupied by tasks that are low on brainpower and profitability while being extremely high up the list in terms of operational necessity. To counteract this, it’s worth using technology to automate as many of these tasks that you can. In 2017, data entry, accounts payable and receivable, and meeting preparation can either fully or partially be conducted by software. Without the need for employees to do these time-consuming tasks, they have more time to conduct work that matters more from an operational and business perspective.
If you manage your finances well, invest wisely, and automate time-consuming practices, your business will be in a good shape to weather any difficulties that this economic storm will bring with it. If you don’t, chances are you’ll be swept away. Bring your attention to focus and proactivity, and you’ll be well-placed to achieve long-term success.