Small businesses must renew plans for a better year
The small business environment has many twists and turns, which if you fail to navigate properly often results in an enterprise falling by the wayside.
An extremely volatile fuel price and an increasingly price-sensitive market are some unpredictable factors that threw a spanner in the works for small businesses in 2018.
Though it is not yet clear what the road ahead for 2019 will look like, it is important for small businesses to reflect on the year that has passed and strategise for the new year.
As many small businesses are run by families, a strategy meeting should include family members and key business employees at a place - not necessarily an expensive venue - where ideas and a plan of action can be thrashed out.
This can be done throughout the year.
A competitive strategy should at least have month-to-month objectives that should be reviewed and revised when necessary.
Challenges and opportunities, and outcomes should be noted monthly and reflected upon constantly.
For starters, says Gary Epstein, MD of small business accounting services provider Easybiz, if your business did not perform well, reconsider paying bonuses.
At the final stretch to the end of the year, you need to know where you stand financially. Employees often expect a bonus, which could put undue pressure on your businesses, especially if it underperformed.
Going into debt to pay bonuses is not a viable option, Epstein cautions.
On the other hand, he encourages businesses that have performed well to consider paying a year-end or nonperformance bonus to boost morale and incentivise staff. This could be a percentage of your employees' salaries or a set amount paid out to everyone.
Alternatively, you could consider a performance bonus, awarded to staff according to how well they met their targets or goals during the year. It's important to keep your staff apprised of their performance throughout the year and explain exactly how the bonuses are awarded, says Epstein.
Planning for the year ahead, he advises small business owners to stay on top of your finances.
Businesses often close for a few weeks at the end of the year, but this should only happen once you've planned budgets for 2019.
Stefani du Preez, director at Innovative Accounting Solutions, another accounting services provider to small businesses, says entrepreneurs need a business financial plan and should understand that it is not a once-a-year necessary evil that is never referred to again.
Your financial plans need to become part of your day-to-day business process. A financial plan should not be static. It needs to be a living document that anticipates and reflects the changes in your business.
"After all, things don't always go exactly as you planned. A business may win a project a few months down the line, which will necessitate changes to strategic and financial plans."
Du Preez says financial plans should consider three scenarios: a no-growth scenario, a moderate growth scenario and, finally, a top-level scenario - or the ideal situation you'd like to be in.
She says it's important to be realistic on the one hand, but optimistic on the other. If a business is not optimistic it is unlikely it will realise its goals.
"Businesses should consider every possible scenario as part of the financial planning process. In addition to basic budgeting, you need to do projections, incorporating elements such as anticipated employee growth, possible capital outlay and the need for a contingency or backup fund."
Du Preez says some businesses are more risk averse than others.
While some businesses prefer to stick to solid, more low-risk projects, others will jump into new projects even if significant risk is involved. What is important, however, is that they all weigh the risk carefully.
She says the riskier projects might promise greater returns, but they could also not deliver at all - you have to plan for that possible scenario too and if you take on risky projects that require major capital outlay, you need to plan for it. You will also need a plan to recover the money if the project is not successful, she advises.