When sales are down, don't panic
Every business goes through highs and lows. But if sales are down for an extended period it’s important not to panic.
Do this instead.
By Michael Mekhitarian
When your sales are down, it can be deeply concerning. Because you start to wonder if you’ve planned adequately, whether your budget will sustain you, what caused the problem, if there’s something drastically wrong with the products and services you offer. The list goes on …These things go around in your head and the sleepless nights start.
But the truth is that many of us have been there. So, STOP. Take a deep breath and remind yourself that every business has growing pains.
The first thing you need to do is honestly assess your financial position and see what breathing space you’ve got. If you’re going to need funding of some sort then by all means start looking for it. Don’t bury your head in the sand. Don’t wait.
1. Take care of the financial position
Lenders can be finicky, and sometimes the money can take time to come through. You’re far better off lining up the credit, even if it transpires that you don’t need it.
If you’ve got your annual business and strategic plans and your budgets and forecasts in place, then applying for finance should be pretty straightforward. And this is why we keep banging on about both and the fact that these documents remain ‘live’ at all times, not done and forgotten and stored away on a battered old USB in your top drawer.
If you need finance, then chances are you will always need to act quickly. Knowing that you don’t have to re-think and re-do old documents and if you’re using accounting software like Xero which gives you real-time views of your finances in any given moment, will seriously take the pressure off. At times like this, you don’t need the distraction or the burden of having to put together a business plan from scratch.
When you have your financial contingency plans in motion, get focused.
2. Think about how you can do things differently
Essentially, while this kind of thinking offers some obvious tried and true solutions that might get you some quick runs on the board, it’s reactive, rather than proactive and it can be corrosive long term.
It’s important to really consider what’s right for your business – both now (as you deal with the crisis, no matter how minor or major) and into the future.
And while this may definitely include potentially re-shaping your product or service offering, it’s also about looking at other financial strategies which can better support your business for the long term.
Now assess your business position, that is what you’re offering. When income levels drop the temptation is to ‘pull in’ but diversification can be the best strategy under these circumstances. And it doesn’t have to be expensive.
When you think about diversification, think about diversifying your income stream and what you offer. Can you rent out spare space in your workshop to a complementary business to share overheads and perhaps even customers? There’s a popular fashion shop in the town of Byron Bay on the Northern New South Wales coast which bought premises – an old home in the centre of town and turned it into a shopping ‘destination’. They have a coffee/ food van parked on the lawn, and upstairs, the attic has been turned into top quality holiday accommodation.
Do you have a website? Adding a website can really open up opportunities for new customers at home and in Australia. Research by the National Australia Bank in 2017 showed local businesses derived, on average, 22% of their turnover from online sales. Furthermore, Australian businesses and organisations export around $30 billion of goods and services every month. If your business is well established here, maybe it’s time to consider expansion further afield. A website that’s marketed well in other countries can help you to test the water in a very cost-effective way.
Think outside the box
Third-party marketplaces can be a great way to take away the money and the hassle of setting up your own online retail presence because payment and distribution functions are taken care of. The largest of these is Amazon Marketplace, locally, online shopping mall MyDeal is popular too.
Can you target a new niche? If you are trying to be all things to all people then maybe it’s time to narrow your focus. Understanding the industry you operate in and staying attuned to your customers (as well as keeping good customer profile and marketing data) can help you find opportunities.
Your business must be adaptable
Have you thought about buying out a competitor? At a time when you’re worried about finances this can seem like a ludicrous idea, but as the old saying goes, ‘you have to spend money to make money’. Buying an existing business whose products or services complement your own can, if you do it right, allow you to grow and diversify more quickly than you’d be able to organically. Financial planning and small accountancy firms often use this strategy to grow their businesses.
Similarly, a confectionary maker on the Gold Coast who sells predominantly to cafes along the New South Wales coast, was, in her early days, spending an enormous amount on shipping, but she was also reluctant to move her base because the set-up is ideal and the overheads are low compared to somewhere like Sydney. Instead, she bought a small trucking business. One of them is refrigerated which does her regular runs to customers, the other two are available for hire. It might seem like an unlikely marriage of industries, but it’s working.
Can you adapting and modifying your existing products and services can increase their appeal to previously untapped target markets. This could mean launching a premium version of your product, or an entry-level one.
If you’re offering a service – can you find better ways to deliver that service? Technology means that webinars and skype and zoom meetings can be a cost effective way or delivering service that mean you’re not burdened with other costs – like travel, room hire, refreshments etc. Can you upskill yourself? Or form a partnership with someone who has complementary skills?
There are other options too of course, considering a different financial structure for the business, perhaps bringing investors in, or setting up an SMSF and taking advantage of possible SMSF strategies.
Similarly, a confectionary maker on the Gold Coast who sells predominantly to cafes along the New South Wales coast, was, in her early days, spending an enormous amount on shipping, but she was also reluctant to move her base because the set-up is ideal and the overheads are low compared to somewhere like Sydney. Instead, she bought a small trucking business. One of them is refrigerated which does her regular runs to customers, the other two are available for hire. It might seem like an unlikely marriage of industries, but it’s working.
Can you adapting and modifying your existing products and services can increase their appeal to previously untapped target markets. This could mean launching a premium version of your product, or an entry-level one.
If you’re offering a service – can you find better ways to deliver that service? Technology means that webinars and skype and zoom meetings can be a cost effective way or delivering service that mean you’re not burdened with other costs – like travel, room hire, refreshments etc. Can you upskill yourself? Or form a partnership with someone who has complementary skills?
There are other options too of course, considering a different financial structure for the business, perhaps bringing investors in, or setting up an SMSF and taking advantage of possible SMSF strategies.
Sometimes when the sales slow down, it’s just a blip, that turns into a small dip. At other times it can last longer and make you re-shape what you’re doing. This is an opportunity to get your creative juices flowing and Just start to think outside your usual paradigms and you’ll be surprised at what you can come up with.
Today’s marketplace does not stand still for anyone and there are disruptors around every corner. You really do have to be on your toes. While none of these decisions should be taken in haste, your business must remain adaptable so that you can continue to grow and thrive as the environment around you changes.
A key to success in all situations is having a solid team around you – aside from strong financial skills, it’s worthwhile considering a business mentor, or a business coach too. When you’re a small business owner it’s easy to get caught up with the day-to-day drama. A business mentor can help you to see the ‘wood from the trees’ as they say, and help you to fully assess ideas so that you don’t leap forward without consideration for what’s both possible and practical.
ATB Partners is based in Paramatta, Sydney and we offer accounting financial planning and business mentoring services. We have assisted many businesses, as part of that process developed our 5-Step Process, which helps you to dig deep into your business, vew it from all angles, understand it better, and take control.
If we can help, contact us.
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