How can my small business recover from a low quarter?
Looking at quarterly results for your business can sometimes be a worrying or stressful experience. However, provided that results are assessed constructively, they can be helpful to keep business owners on top of developments within the organisation and the marketplace.
If a business experiences a low or negative quarter, there may be a good reason as to why. One example may be that the company operates as a seasonal business. In any event, such a result will encourage firms to look closely at their current operations. Several actions can be taken to turn things around, treat this as an opportunity to make the changes necessary to improve the company’s bottom line.
Take a look at cashflow
Taking a close look at the cash flow will provide an indicator of quarterly receipts. Viewed over the year, this may give context to the results. There may be particular quarters that have significant outgoings, such as rent on buildings, and coinciding with other major purchasing or infrastructure costs. It may be worthwhile investigating if these costs can be undertaken sporadically throughout the year to improve cash in hand during each quarter.
Future planning allows businesses to be able to plan cash flow for the coming months. Companies should avoid running the risk of missing a crucial payment to a landlord or key supplier, and short-term borrowing is not the solution. Taking time to establish where invoices are coming from and how efficient the payment collection process is working will mean businesses have a clearer view to see outgoings and the impact they will have on quarterly results.
Minimise expenses and key outgoings
If the cash flow forecast for future quarters is indicating potential problems, it may be time to look at what expenses are occurring and how necessary they are. Take a close look at what works and what is negatively impacting the firm’s results. The ability to control costs efficiently will increase fuel growth majorly.
It could be that future expansion plans go on hold and the expenses associated with them re-invested in the business to improve cash flow.
Another approach to reducing costs in the context of future plans is to explore the possibility of partnerships with businesses within the same sector where costs can be shared. Remember that every aspect of the company warrants in-depth analysis when it comes to costs, whether that is an office or warehouse space, human resources, transport or capital investment in machinery or stock.
Finally, looking at company credit arrangements with key suppliers may help to alleviate capital strain. Remember, there are alternative options out there. The firm may have been in a relationship with certain suppliers over several years and noticed costs slowly increase. If there are viable alternatives, this is an opportunity to open up re-negotiations on cost and payment terms.
Review your business strategy
Modern strategies are fluid, reflecting ever-changing markets. Low quarterly results should be encouraging enough to take action on a strategy for better managing company expenses. Are all elements of the strategy still appropriate, and has the firm been meeting key objectives? Were they relevant and achievable, and does the business need to re-assess them?
Perhaps this could be the time to discuss matters with fellow employees who may have their own ideas as to how things could be improved. Staff may have views on technology support, alternative sales targets or training levels within the firm. An internal skill and objectives audit can be valuable in identifying any causes of underperformance.
Consulting with staff will encourage more extensive debate and mean that the search for solutions is shared and that staff feel valued, thereby driving improved performance and efficiency. It may also lead to the business taking a different and more profitable path.
The business model the business has been operating may no longer be relevant in a particular sector. Failing to make the necessary changes in the face of stiff competition is going to impact negatively on quarterly results.
If a company voices that it needs to make more money, it is then crucial to develop a strategy which is both clear and achievable. Basing the strategy on quarterly analysis means that it can be monitored from inception. Set different goals and don’t concentrate solely on financial results, essential as they may be. Improvements in the workplace will be appreciated, even if it takes time, resulting in higher productivity levels and an improved margin.
Be clear as to where you expect increased revenue to come from, will the source be repeat customers or new business?
Take a close look at the business’s sales strategy
The cash input needed in the wake of a bad quarter is likely to come from sales. Thoroughly review current sales strategies and marketing efforts, as well as analysing accounts receivables and collection methods to see if any cash is unaccounted for there.
Getting the sales team to look at previous quarter achievements (or the same quarter of earlier years) can also result in new ideas that will improve cash flow. This alone may very well preempt a similar quarterly problem from arising in the future. Remember that a sales pipeline needs to be based upon facts and hard data, rather than assumptions.
The secret to success is to remain calm and choose to take action after low quarterly results. Almost every business goes through this at some stage. A long-term plan will ease the stress of quarterly analysis and will provide a wider view of future performance expectations.