There should be clearly defined roles in businesses

Leadership is crucial to keep a business on track and should be the responsibility of the CEO or MD.

Too often, however, the lines become blurred, so that particularly in small businesses the MD becomes embroiled in issues that should be delegated to others.

Similarly, all too often line managers leave HR to do their job of managing employees, especially when it comes to dealing with performance related issues.

What causes this kind of behaviour? Is it an issue of trust, such that the leadership has insufficient confidence in line managers’ abilities to manage staff? Or do line managers lack confidence that they will be supported by their own managers?

This is often about fear. If line managers have insufficient knowledge of the limits and responsibilities of employment protection, and employee rights, or lack confidence in handling negotiation, or that their decisions will be supported, it is very tempting to leave it all to HR.

We would argue that no business can be successful unless it has a clear line of command, with roles and responsibilities clearly set out and a company handbook to guide everyone, managers and staff.

When a business becomes dysfunctional it is important to look at the management behaviour to establish whether the roles and responsibilities have become mixed up, leaving a beleaguered CEO to fire fight when they should be thinking ahead about strategy.

Saving a business may mean changing behaviour

It is a common reaction when a small business is in trouble for the owner/MD to hope the problem will resolve itself.

Indeed most owners and MDs live with pressure every day and have seen it all before, the cash has been found to settle creditors, They toughed it out last time so why not this time.

Cash flow pressure and the prospect of insolvency threaten the loss of a business which has involved a lot of passion, energy and money where like any loss can lead to feelings of anxiety or fear, even of grief.

It is hardly an ideal state of mind in which to address the causes of the problem and very often the initial reaction is denial. This can lead to a number of feelings such as anger, blame and despair all of which get in the way when trying to think logically and rationally.

But the longer the delay the more overwhelming, and dangerous, the situation becomes.

Behaviour is normally instinctive and directed by an emotional reaction rather than logical thinking.

Saving a business however requires rational and logical thinking so that decisions can be made and implemented.

This is where trusted colleagues and friends or professional advisers are key to providing the support needed to help make the right decisions which all too often can be personally painful. A form of tough love. Especially when change to a business is needed to both save it and prevent the problem recurring.

Please feel free to let us know about such painful decisions you have made.

Is there a solution for SMEs struggling with lengthy payment terms?

Large companies that impose lengthy periods of ‘end of month plus 90 days’ for invoice payment present a dilemma for small businesses.

On the one hand it may bring in large orders and be good for their reputation as a supplier to a well-known large brand. On the other hand, however, the lengthy wait for payment can cause serious cash flow difficulties.

Large companies are getting away with imposing such terms despite being named and shamed, the latest being beer company AB InBev (payment in 120 days) and Heinz (payment extended to 97 days).

In an attempt to hold companies to account, the Federation of Small Business (FSB) has called for a compulsory code committing large companies to displaying their maximum and average payment terms.

While we can certainly sympathise with the outrage over this behaviour and agree with FSB’s request that firms disclose their longest and average payment terms, there are ways that SMEs can fund themselves while they wait for payment.

Apart from an overdraft or loan secured against assets such as the sales ledger the obvious solutions are factoring invoices (selling debt) or invoice discounting (borrow against invoices). There are other sources that can help fund working capital such as credit to customers. These include the alternative and online funding markets that have a number of sales ledger and single debt offerings including the prospect of selling or borrowing against as single invoice. Another solution is trade finance, although quite specialist it is useful for funding large transactions and especially useful for SMEs when they get a large one-off order.

K2 publishes a Business Finance Guide covering a wide range of options for business finance, available free through the Knowledge Bank on our website

SMEs need contingency plans to survive a disaster

What would you do if…

  1. Your office equipment failed or you had no power for a week?
  2. Your phone stopped ringing because a cable or VOIP was down?
  3. You couldn’t access your e-mails or cloud based files because you had a problem with your network or IP provider?

Losing the ability to operate a business in the event of a minor, let alone major disaster can have serious consequences that in turn can impact on sales, reputation and cash flow.

Despite this, few businesses have contingency plans for possible disaster scenarios or have a back-up in place for such situations.

If you rely heavily on office-based equipment such as computers and printers it makes sense to also have laptop and access to a printer. Separate access to wifi is also useful. If the telephones are down then knowing how to switch calls to VOIP, another phone or a mobile is essential. If you rely on access to desktop or server based files then cloud based systems will give you instant access which may be far quicker than relying on back-up tapes and hard drives. It may be strange but all too often the access codes are stored in a computer that is down.

Laptops, tablets, mobile devices and virtual offices all make it much easier to work remotely but some planning means there can be a seamless transition in the event of a disaster.

Please share your own backup plans and any tips for others to adopt.

The marketing value of “thank you” in business

We recently heard of a SME owner who sent out a New Year’s greeting card to their customers and suppliers with a hand-written thank you message for their support during the year.

It was a small thing, but thoughtful, personal and hugely appreciated judging by all the positive comments it generated on social media, which turned the courtesy into a great piece of marketing.

We also know of a very successful cosmetic surgeon who wrote a hand-written note as a follow-up to the contacts he made and as a result built a successful business which he attributed to his personal attention in writing letters.

As the economic recovery continues increasing numbers of small traders and SME start-ups are appearing and not all of them are offering something unique, so the competition is heating up.

Despite the pace of change and the digital revolution they will need a way to differentiate themselves from the rest.

Hand written and personal thank you messages could be an effective way of doing this and therefore still have a place in the marketing mix.

Have you tried it and with what results?

The power of networking via Social Media

Cash strapped businesses cannot ignore the need to maintain their visibility and risk losing existing customers who may assume they have disappeared, nor can they risk not having a way of finding new ones.

Despite any lack of cash, entrepreneurs should be innovative and find ways to best use their time to promote and grow their business.

Many people use networking as a great way of doing business by going to functions or attending a regular local networking club such as BNI. With effort and discipline networking can grow a business by generating leads and making introductions. It works best where a close-knit team work together to promote each other’s business.

Networking via social media online can be similarly effective and have the benefit of offering you scope for establishing some highly valuable relationships with people anywhere you want to do business. Unlike face to face networking, location is not a barrier.

Like face to face networking, social media networking is not a short-term fix; both require time and effort to build relationships which in turn produce results.

It takes a while to find your feet but a start is to participate in online discussions to find other like minded networkers. Like networking clubs, finding the right online groups takes time but there are plenty to check out on LinkedIn, Twitter, Facebook or Google+.

In addition to finding the right group you need to find the right social media for you and your business. It is no good being on Facebook if the people you most need to connect with tend to be on LinkedIn.

Building the right group is also important. It is no good having lots of followers or members if you aren’t working together to establish a mutually beneficial relationship. Having 10 Followers on Twitter who

Follow each other and work together by promoting each other and actively referring leads to each other is far more valuable than having 1,000s of Followers or even worse, Following 1,000s of others.

If you are lucky sometimes your message ‘goes viral’ but it takes practice to find a message that others are genuinely interested in. Like all forms of networking, the hard sell on social medial puts people off, but a Tweet, post or comment that is genuinely interesting or valuable turns its readers on. If inspirational or engaging they may share it, and then you might get lucky.

The challenge is to make it work for you. Perhaps you can respond by sharing an inspirational comment for others!

Retail start-ups – opportunity or lack of opportunity?

An estimated record 10,000 new retail businesses were launched in 2014 compared to 2013 according to Creditsafe, a company providing information on the health of businesses.

The new retail start-ups included shops, online retailers, cafes and restaurants and the development was being interpreted as a sign that entrepreneurs are leading the economic recovery partly because retail is seen as a major indicator of consumer confidence.

However, it remains to be seen how many of these fledgling businesses are still trading in 12 months’ time and whether this is indeed a case of entrepreneurs seizing opportunities or whether it is in fact a response to the lack of alternative opportunities.

It has been clear for some years following 2008 that retail is a volatile sector and has been in the throes of huge changes. While there are positives in the rise of the “shop local” initiatives aimed at supporting independent small traders, there has also been evidence that people have become very cost conscious and cautious in spending with smaller but more frequent trips to the shops.

Online shopping and a disenchantment with major High Street chains and edge of town superstores may indeed be a positive sign for the 10,000 fledgling retailers, but they will need to be very canny about pricing, marketing and controlling cash flow to survive.

We await the January post mortem on retail trade during Christmas and New Year, but already it looks like 2015 is going to be an interesting year.

Planning for the year ahead

SMEs often use new year as an opportunity to plan for the year ahead and might benefit from knowing about Rudyard Kipling’s six wise friends: Who, What, Where, Why, When and How.

But while it may be straightforward to answer What (the goals and targets), When (by what deadlines) and Where (what sector and what clients might be most productive) the Who, Why and How are more difficult.

Who: the allocation of tasks is critical for success, including leaving you time to spend on the non-daily activities. Do you have the right people in your organisation, do they have the skills, such as devising and carrying out the marketing strategy that will be needed to meet your goals?

How: are there alternative ways such as outsourcing activities?

Why: this essentially invites you to consider your business model that encompasses all the elements of your business. Is it viable? Do you have sufficient funds or the cash flow to support your plans? Does it generate sufficient profits to justify your effort?

Finally, are you as the owner spending enough time on strategy, finance, marketing planning and leadership as all too often these are neglected when you are busy with the daily operation?

When planning for the future, it is worth considering whether an outside expert might be able to help you, you might be surprised how valuable this can be and it doesn’t need to be expensive in terms of cash and time.

I wish you a very happy new year.

Planning ahead? Declutter first

The period between Christmas and New Year is a time when many SMEs plan ahead for the next year.

Something that is often forgotten, however, is that it is difficult to see clearly through a pile of unfinished business that has been put to the bottom of the list because it was not urgent.

Is your book keeping up to date? Have you done your expenses? Does filing need attention? Is it time to cull some of those contacts who might have been useful but with whom you have had no interaction?

Planning ahead is not only about setting new goals and targets but also about becoming more organised so that progress can be monitored and reviewed at regular intervals, and your plans adjusted accordingly.

Preparing for next year is not easy if the information on the past year’s performance is not up to date.

Equally it is hard to think clearly, let alone plan when surrounded by clutter or outstanding actions.

If this is a situation you recognise, perhaps the decluttering process will encourage you to consider how to make life easier next year. There are a number of ways to reduce the build up of clutter, they are however boring since they involve discipline which is something most entrepreneurs lack.

The logical solution is to set aside a specific slot in the diary, every day, week or month to ensure that the low priority but essential jobs such as record keeping and admin get done. It also makes sense to ask why you are doing tasks, indeed your time is valuable so stop doing non essential tasks if they aren’t necessary, or consider outsourcing regular activities such as accounts or filing.

Loud music can help you declutter – I recommend Queen.

Use the Christmas break to refresh and regroup

Anyone running a small business will know that it is easy to lose sight of the bigger picture in the face of the daily list of “things to do”.

So the seasonal festivities offer a chance to relax and regroup. Taking a break every now and then is important for mental health, as is reconnecting with family and friends who too often have to take second place.

It also provides a chance to reflect on the past year and plan for the next one, setting goals and thinking through how to achieve them.

So we at K2 we would like to wish you all a happy and restful Christmas break and hope that you start the New Year refreshed and ready to lead your business to greater success.