Top tips
Start-ups should take 10 key steps to avoid becoming another statistic:
- Develop and implement a credit policy: Take the time to write a clear and concise credit policy that applies to all of your customers and clients. Have the policy signed by all new and existing customers and clients.
- Watch your cashflow: That means creating a cashflow forecast, invoicing frequently as soon as a job is done, creating a schedule of what’s owed and sticking to it while calling in overdue accounts and making sure they understand the debt recovery procedure.
- Implement a policy for recovering bad debts: To recover a debt, you may wish to take legal action, however, you should always weigh up the advantages and disadvantages of legal action for the recovery of bad debts. You could also use a debt collection agency. With an effective credit policy in place, bad debt should be minimal.
- Develop a business plan: This should have an executive summary, market analysis, company description, organisation and management, strategic analysis, marketing and sales management, service or product line, the amount of funding to start or expand the business, financials and an appendix.
It could include a summary explaining the business concept, the current situation, the key success factors and financial needs. There could be a vision statement identifying what the business is about and setting out milestones.
The plan should also detail products and services, look at how they are competitively positioned and identify future products and services. There would be a market analysis looking at customer characteristics, their needs and buying decisions.
That would be followed up by a competitive analysis looking at primary competitors, their products and services and identifying the opportunities, threats and risks.
There also needs to be a section on strategy looking at key competitive capabilities, key competitive weaknesses and how the company plans to implement strategy.
- Create margin for error: Nothing ever goes exactly according to plan. The business plan needs to have some sort of flexibility recognising that there can be some variation.
- Check your milestones: Make sure you monitor how you’re travelling with your business plan and check to see if there are any deviations. If there are deviations, see how far out they are and whether these can be remedied.
- Create a crisis management team: This could be three or five people, it doesn’t matter. You might need to bring in someone from the outside. Develop an approach to the problem.
It might be tactical, operational or legal, and then implement. It is a good idea to build relationships internally and externally so that you have people to call on when you need them.
- Look at your marketing strategy: As a rule, your customers are your number one assets and 80% of your revenue usually comes from 20% of your customers. Make sure you are still connected to existing customers. You could ask them how you could better serve them.
Tweak your marketing if you want to attract new customers. That includes your website, brochures and correspondence.
- Conduct an overall cost analysis: Look at how you can reduce overheads. Is there too much inventory with products that don’t sell? Can you negotiate a better price from suppliers? Are there other ways to save money?
Sacking people is usually the easiest way to cut costs but it’s usually not the best approach. Getting rid of people is usually a reaction than a well-planned strategy.
- Identify opportunities: No crisis should be wasted and in every crisis, there is an opportunity. Changes or setbacks can force you to identify new opportunities.
With every crisis, there are winners and losers. It can create opportunities to expand.
