Growing the business
Challenges you will face as your business takes off.
As your business gets off the ground, it is important to have a strategy for dealing with disaster.
Disasters take many forms, including 'natural' causes such as floods or storms, and 'man-made' calamities caused by human error or sabotage. Careful preparation will minimise the impact on your business, so you should act sooner rather than later.
Here are some of the areas to consider:
Remember: being prepared could make all the difference to the well-being of your staff and the long-term survival of your business. Even if the worst doesn't happen, you will reap the benefits, by reducing your vulnerability to everyday risks and improving staff confidence
No matter what line of business you are in, sales and marketing will be an essential element in growing your enterprise.
Whether you have a marketing department or the marketing department is you, here are some elementary ideas for improving your performance:
- Make sure your products or services are distinguishable from your competitors'
- Monitor your competitors' marketing activities, and change your own as appropriate
- Have a marketing plan - and follow it!
- Aim to provide a regular stream of new customers
- Respond quickly to customer complaints, investigate the causes and fix the problems
- When you lose a customer, contact them and find out why
- Uncover customers' needs. Find out what they really want from your business
- Keep advertising expenditure within industry norms. Over-advertising smacks of desperation, under-advertise and no-one knows who you are
- Search for new markets for your products or services
- Keep your existing customers aware of all you can offer
- Actively look at new products or services
- Keep your sales forecasts and statistics up to date and distribute them to appropriate employees
- Make sure that staff who come into contact with your customers or clients have high morale and present a positive image of your company and its products and services
- Use your remuneration structure to motivate and reward sales people
- Invest in sales-focussed training for your non-marketers (show them how they can have an impact on sales)
- Evaluate the performance of your sales team and provide training where needed.
Inefficient stock management can seriously damage the profits of any new or growing business. Holding stock ties up valuable cash, and incurs costs in warehousing, personnel, transportation and insurance.
In an ideal world, every business would have no stock at all but would operate entirely on a well-tuned just-in-time system with materials and parts arriving in the order and quantities in which they are needed for retailing, or for the manufacturing or assembly process.
But since most small businesses do not have the resources to implement just-in-time, here are some suggestions for reducing stock costs:
- Identify those materials that are commonly used in numerous different products - and use them as widely as possible.
- Check the quality and accuracy of goods received from suppliers. If you only spot the poor quality at the end of the process, it is too late.
- However, if you work closely with your suppliers and build up a relationship of trust, you may be able to cut down on the time spent checking the materials that come in.
- Wherever possible, reduce the lead time for ordering materials, but take care not to unwittingly create hold-ups in production.
- Constantly review sales trends and cross-reference them with stock requirements.
- Make sure delivery schedules are well choreographed with production - try to avoid holding any more finished products than you really have to.
- Try to negotiate discounts on virtually everything that you buy and then negotiate terms for payments and interest rates.
Finally, a note of caution: although it is generally best to keep stock as low as possible to avoid tying up capital, this might not always be the case if there are really significant bulk discounts available.
If you decide to make changes to your stock levels or procedures, be sure to do so within the context of the business as a whole: never make stock decisions in isolation.
When it comes to building a market and servicing it, you and your suppliers are on the same side, so you should consider trying to build a relationship with them that reflects that.
Sit down with them as 'partners' and try to work out an arrangement that benefits both parties.
Try to identify:
- Products you can order in larger volumes in exchange for volume discounts
- Orders you can discontinue because you can buy more cheaply elsewhere
- Ways to revise delivery schedules to reduce your stock keeping costs
- Opportunities to share marketing or promotional costs
- Ways you can exchange information to improve efficiency at both ends
In a period of economic difficulty or uncertainty, remember that suppliers might raise their prices, so try to negotiate a long-term discount with them.
You could also consider putting all major costs out to tender on a regular basis.
As your business grows, you will probably need to hire new staff members.
Recruiting the right people
Without good people your business cannot succeed, and for a new or growing business, making the right recruitment decisions can be the difference between long-term success or failure.
Consequently, you need a structured process for recruitment. Here are some things to consider:
Identify exactly what you are looking for
Avoid getting swamped with piles of CVs. Talk to existing staff and define the vacant role that needs to be filled. Then build a picture of the ideal candidate, and find which applicants most closely resemble this picture.
Can you promote from within your team?
Promoting an existing staff member to fill a vacancy can save enormous cost and risk compared to external recruitment. But make sure that the employee has sufficient training and skills to cope.
Make sure that you are objective when interviewing
Structure your interview process, take notes and be consistent. Liking the person is not enough: you need to discover how competent they are. Open-ended 'behavioural' questions are good for determining this: you ask candidates to describe real-life situations at work when they solved problems similar to the ones they might encounter in your business.
Offer staff recruitment incentives
Existing staff might know good people who would be interested in the job. Offering a financial incentive can save you a fortune in recruitment agency costs.
Have an effective induction procedure
Ensure that all new staff have a formal induction programme, intended to make them familiar with their new job. This will pay great dividends in the long term.
Hiring suitable staff is essential to the success of your new business, so it is vital to get the interview process right. Here are some of the factors to consider if you want to avoid losing a great candidate, or employing an unsuitable one.
Consider the post carefully
Draw up a job description detailing the responsibilities involved. This will help you to clarify the type of skills and experience that you're looking for in the employee. Make a list of these characteristics and compare it with your impressions of the candidate.
Set the right questions
Everybody knows the classic interview questions. But standard questions can elicit standard responses, so you need to focus on what it is you are really trying to discover about the candidate. The old favourite "Where do you see yourself in five years time?" won't necessarily tell you how the applicant will actually perform in the specified role.
Interviewers are increasingly using open-ended 'behavioural' questions which allow the candidate to demonstrate how he or she has acted in relevant situations in the past. For example, you could ask the applicant: "Can you describe a time when you were hard-pressed to meet a difficult project deadline with limited resources? How did you handle the situation?"
You want the candidate to be relaxed, not overly wary, so explain the form the interview will take beforehand. Be prepared to answer the candidate's questions about the company's size, mission, culture and future. The interview is a two-way process, and in a competitive job market you may want to create as good an impression for applicants as they do for you. Why not put together a one-page factsheet with details about the business?
Take notes and be consistent
Keep notes of your impressions as the interview progresses. These will act as a memory aid when interviewing a large number of candidates, and will also help you to be consistent and use the same criteria for each interviewee.
Be sure to follow up references from candidates' previous employers. Remember that what is not said can be as important as what is said.
It is essential to ensure that you do not discriminate against any candidates on the grounds of race, age, gender, religion, sexual orientation or disability.
Ten great interview questions
- Why are you here?
- What motivates you?
- How do you take advantage of your strengths and compensate for your weaknesses?
- What's the one accomplishment you're most proud of and why?
- What are the most important attributes of successful people, and how do you measure up?
- Give an example of a time when you needed to adjust quickly. What did you do and how successful were you?
- Describe an occasion when you had to deal with a difficult customer. What solutions did you come to?
- Tell me about a time when you had to make an important decision and a colleague strongly disagreed with you. How did you resolve the issue?
- Describe a time when you were asked to do something for which you had no training. How did you handle the task?
- Tell me about a period when your workload became very heavy. How did you cope with the pressure
There are many legal implications for taking on staff. Areas to consider include:
- Equal opportunities - there must be no discrimination on the availability of jobs, training and promotion on the grounds of race, sexual orientation, gender or disability.
- Terms and conditions of employment - these must be provided to all employees.
- National Minimum Wage
- Working hours
- Fair and unfair dismissal, and notice periods
- Illegal workers
- Statutory sick pay
- Statutory maternity and paternity pay
- Employers' liability insurance
- Health and Safety
This is not an exhaustive list. You should always seek professional legal advice.
There are also tax issues to consider, such as setting up a PAYE scheme. We can help you with this.