A mature and regulated financial industry is one of the benefits of owning or managing a business in the UK. Although we’ve had plenty of reasons to feel despondent in recent years, the fact that the UK was one of the first in the Eurozone to lift out of recession is something for us all to be proud of and especially those of us who drive the economy. I’m not referring to large industries or multi-national corporations; those of us who drove the economy through round after round of austerity were small business owners with a handful of employees.
So, what have we learned during the struggle that we are able to pass on to the SME and micro-business community? If anything, I would list budgeting and planning near the top of priorities and that’s something many failed businesses ignored because they felt there was never a reason to plan when they were living from one order to the next and barely breaking even. In fact, those are the most important times to plan and budget because there is nothing worse than expecting a bad situation to rectify itself without attention.
Here are My Top Tips for Business Budgeting During Times of Austerity:
You might think this is a bad move, but there are many businesses failing, lacking confidence or both during tough times and you still need to have at least a year of funding available for any expansion plans, but you can capitalise on other business owner’s lack of drive – just don’t over commit. For example, why expand your warehousing facility when you can rent for much less and that way you only pay for space you need. Use a self-store facility that has business friendly terms that allow you to use fork-trucks and take large deliveries – you would be surprised how accommodating these businesses are when you can guarantee them better levels of occupancy.
Convert to a Subscription Run Business
This means stop investing in equity (such as warehousing) products and only commit to subscription services that have cancellable contracts. For example, don’t invest heavily in expensive IT equipment when you can easily use IT Infrastructure as a Service (IaaS) instead and forget about worrying about the rapid depreciation of your company vehicles by exploring car or van leasing options instead. IaaS means you never need to pay for an upgrade and it costs the same to lease your company vehicle for a year, as the amount you lose when you drive a new vehicle off the forecourt.
Use Low Risk Funding Options
You should always be able to sit out a few months of low revenue thanks to your reserve bank accounts, so it’s not a good idea to risk everything by investing your contingency fund, but there are low risk options available for most businesses.
Alternative finance is available for many businesses that are able to offer equity as security, but that can mean rewarding investors for temporary assistance when it may have taken years to reach your current situation. If you accept card payments, a business cash advance is a real option because unlike loans, cash advances from businesses like Liberis lets you take investment, but instead of fixed repayments, you only sacrifice a percentage of your sales each month until the investment is returned.
The Bottom Line
Ultimately, the message to take from this is that traditional ways of building security in your business do not apply during times of austerity, but that should not inhibit expansion or optimism. If you have a great business with an equally impressive work ethic, all you need is the same courage you had when you first started trading.
Shaun Thomas is a business owner and mentor whose enterprises have consistently prospered while many have endured falling revenues and squeezed margins.