If you are a small or medium-sized enterprise, as we approach the end of the Annus Horribilis that was 2022 and try and look forward to 2023 the future holds lots of uncertainties. We are on our 3rd Prime Minister this year, we see no end to the war in Ukraine and its impact on commodity prices, fuel costs, and utility costs and we are continuing to see crippling strikes for pay rises that if they are agreed to, will filter down into the private sector leaving company profits decimated. So how can SMEs plan?
Whilst you cannot ignore the impact that these will have, there are some strategies to bear in mind whilst trying to make plans ahead: –
1) Consider doing more business locally. It may be a statement of the obvious but look around the local economy to see if there are local businesses you can work with. Discuss your business with your local Chamber of Commerce and see if there are local businesses that could use your products and services or vice-versa.
2) If you are sourcing products or raw materials from abroad, see if there is a UK alternative. Remember, that sometimes currency losses and delivery times can outweigh the increased UK cost.
3) If you must buy from abroad and you have not done so before, speak to your bank about how you can mitigate currency fluctuations by forward buying currency.
4) If you are exporting, target your markets carefully and consider utilising the various trade missions organised by the local Chamber or LEP as a means of meeting the right people. Again, the Chamber can introduce you to its members who are already exporting to your target market for advice.
5) If you are thinking of setting up a branch or company overseas, before you do so, talk to your accountant. Many have links with or are members of international networks and they can put you in touch with a local member who can link you in with local legal requirements as well.
6) Make sure you understand the paperwork involved if you are importing or exporting for the first time and its impact on your administration.
7) In the present climate, keeping tight control of your finances is a must as is measuring your performance, so good management accounts are key as is good budgeting so you can measure your progress. Too many SMEs pay lip service to this with the owner managing by “gut feel” rather than hard facts. It is amazing how many businesses still do not prepare a budget or set targets and then wonder why they are “surprised” to find themselves struggling.
8) Good staff are a must which also means good quality HR policies and support and continued training. Often when things are tight, training is one of the first areas to be cut back but it is a false economy. Without well-trained and well-motivated staff, no business can achieve long-term success. If you cannot afford an in-house HR solution, there are plenty of good HR resources that you can get advice from either via trade associations or directly. There will be pressure on pay but if you cannot afford it, be honest with your team and see if there are more creative alternatives to ease the burden on their lives. Doing well by your team will always pay dividends. Consider alternatives to significant pay rises like profit-sharing schemes, spot bonuses for good work, access to advice on mental health issues, etc
9) Carry out a risk assessment if you have not yet done so to see where the weaknesses are as a business and what you can do to mitigate them. Remember risk exists everywhere in your business and not just in financial terms.
10 Finally, you must have reliable and robust IT systems. Only last week, someone I know announced via social media that their systems were down and that there would be a delay in taking and fulfilling orders. It was only for a few hours but for that period the wrong messages were out there about that business and who knows how much business was lost. You must have backup systems in place to ensure business continuity in the case of an IT issue.
There are many other things a business can do to survive and prosper during 2023 and beyond but hopefully, if you manage these 10 things, you are well on the way to a successful time.