Small businesses are important to the Australian economy as they account for 99% of all Australian businesses, contribute hundreds of billions to the economy and employ more than 5.5 million people1.
However, despite their importance, small to medium enterprises (SMEs) have traditionally struggled with 1.5% of Australian businesses closing within their first year2. Understanding what small business owners go through, and what they need to overcome, can help businesses succeed now and into the future.
Some of the challenges include: not having the money to make the changes they want or cash flow to pay their bills, not having enough time to do it all, and not using the right technology . . . the list goes on.
The good news is that businesses just like yours are overcoming these challenges every day.
Here are the 5 most common challenges small businesses struggle with, and strategies to help overcome them. These aren’t quick fixes — but they will take work. The solutions can help you move forward to maintain and grow your business.
Challenge #1: Financing and cash flow
Having trouble with cash flow and not being able to pay your bills or having funds you need to make the changes that you want is one of the main challenges. By focusing on your cash flow management rather than profit can ensure you have enough funds on hand to manage your day to day operations. Also understand your break-even point so when you do become profitable, you are able to put the money aside to reinvest in the future.
There are 3 key points you must be on top of to manage your cash flow and get to your break-even point.
1 – Know what customers owe you and have a plan to follow up with them that’s inside the terms of your invoice. This is your accounts receivable.
2 – The next is accounts payable, the money you owe your suppliers and any due date of payments.
3 – The difference between points 1 and 2. Shortfalls do happen so it’s important to have money on hand to cover these when they do happen.
Save extra money where you can, it sounds simple but invest in things like energy efficient lightbulbs to cut down on your power bills, review your equipment and upgrade to more energy efficient machines to cut down on your power bills. Negotiate prices with suppliers, barter and trade on your goods and services, use free marketing and offer valuable content to customers. Be aware of any rebates, grants and asset write–offs you might be eligible for. The ATO has a scheme where you could purchase an asset to the value of $20,000 for your business that is tax deductable.
Challenge #2: Time
Most SMEs say there is not enough time in the day to do the things they want, or need to do. But have you ever kept track of how you spend your time? Do you do the important things first?
Focusing on your top priorities can help you reach your business goals. Establish a team and delegate activities that are not high value but need to be completed to give you time to focus.
Challenge #3: Using the right technologies
For some SMEs, understanding and implementing the right technology for their business is by far their biggest challenge. Before you do your research, think about what you need the technology to do. Some could benefit from integrating their terminal with a point of sale software. This brings many timesaving benefits, can help with end of day reconciliation and also identifying trends (i.e. peak sales time to ensure you have sufficient staff or knowing which stock is flying off your shelves). Tyro partners with over 240+ POS systems that integrate with your terminal.
Technology can also be used to help you reach and retain customers. You could use it to manage online appointments, let customers know about upcoming specials and events and even share reviews from other customers, which will help you attract more.
Understand what your customers are interested in. When was the last time you looked at Google Trends to get an understanding of what people are searching for? Do you use Google Analytics to see who visits your website and what pages they read?
For customers who have a Tyro Bank Account, the Tyro App on your smart phone is another way technology can help you stay across your business and financials. Receive notifications for things like when deposits land in your account and when funds are too low to cover scheduled payments to your supplier.
Challenge #4: Lack of information and reporting
From point 3 above, using the right technology can give you insights into your business and can provide a lot of the information you need day to day. To stay one step ahead of your competitors you need to stay on top of trends that happen within your industry (and in some cases, your local area).
Do your research. Take advantage of industry research and trend reports. Subscribe to publications and influencers in your industry so information is sent directly to you. It can pay to set time aside each week to read reports, blogs and newsletters to keep yourself educated on what is happening that could help or hinder your business.
Challenge #5: Facing increased competition
For businesses that are growing in size, they often find the number of direct competitors decreases. However, this means when your business increases in size, you have to define yourself against your competitors more directly. New companies entering your industry need to establish themselves to be a direct threat but keeping on top of trends can help you identify where you need to take your business to stay relevant and reduce this risk.
If you are a smaller business and cover a regional area or niche market, new competitors might not make a big impact however online stores and large companies like Amazon should be a watch point. Always define your point of difference and stay relevant to your customers so they keep returning to your business.
Also keep in mind what is happening in the economy. When the economy is strong and people are spending more money, the threat of competition is dampened but, if this changes, customers might start shopping around. Use the above points to make sure your customers keep coming back.
When faced with new competition you have two options for your business. You can either alter what you offer – features, price, and service, to meet the challenge presented by the new entrant, or you can modify your offerings to keep up with the change in trends and be different to your competitors.
1 Fintech lending to small and medium-sized enterprises, February 2018 Australian Small Business and Family Enterprise Ombudsman (ASBFEO)
2 www.smh.com.au/business/small-business/why -do-businesses-fail 20140904-3evv4.html