Simple – but not obvious – ways to prosper in tough times

(By Steven Cohen, managing director of Softline Pastel)

April 2009

The way to run any business successfully - in good or bad times - is to keep things simple. What people don’t realise, though, is that truly simple things are not necessarily the obvious things.

Funding

Take arranging access to finance as an example. Most people don’t realise that the simplest way to make sure you can always get funds is to arrange them before you actually need them. As in, signing up for a range of credit cards as emergency finance for your business. Or extending your home loan and overdraft while it is obvious to the banks that you can service them.

Also, run accounts with your suppliers rather than paying cash. That way you’ll always have cash on hand.

You see, cash is king. Fixed assets, future orders, or promises of bank loans won’t pay current bills. In other words, you can’t operate without cash. So, apart from always having cash on hand, know how much (and when) cash is due to come in – by doing daily cash flow forecasts.

Focus

Then, remember that sales are what drive cash into the business. So focus on your sales activities more than on, say, operations, administration or finance. Don’t neglect the other functions. Just put sales first.

Management style

When it comes to the way you, personally, behave within the business, focus on personal effectiveness, not management fads. In other words, stick to basics. Your employees have no-one but you to follow. So they will copy your time-management, punctuality, neatness, ability to prioritise, attention to detail, respect for planning and deadlines, and respect for administrative efficiency. Therefore, make yourself as effective as possible.

By the same token, don’t try and be perfect. Yes, make decisions and do that to the best of your ability. But don’t suffocate the business by spending too much time crossing every last ‘t’ and dotting every single ‘I’.

Employees

Once you have yourself sorted out, make sure that you incentivise your employees so that they actually want to use their initiative and share the responsibility of running you business with you. Treating employees like children gives them unspoken permission to leave all the decisions to you.

Sharing the business

If you’re wondering whether to take in a partner, don’t. Building a small business is a highly personal labour of love not easily shared with someone else. But, if you really feel you can’t do it on your own, try a temporary joint project, with a clear division of labour and profit. Or, enter a very loose association and sign a formal agreement that clearly defines roles, shareholding, decision-making, outside interests - and how to split up.

Customers

Having only one customer, however profitable, puts you at risk of losing everything when that client relationship changes. Keep seeking out new clients so that if one falls away you have enough orders from others to keep you going.

Systems

Doing all the work yourself limits your growth because you end up not having the time to take on more work and you can never step back to look at the business objectively.

So, use systems that allow you to delegate work to employees in a way that assures you that the work will be done the way you want it done. Begin with the most mundane tasks.

Remember, good systems allow a newcomer to take over from an old hand with the minimum of disruption. They produce information that allows the business to be monitored from a distance. And the best systems are constantly improved, based on the expansion of your experience of what worked and what didn’t.