Take advantage of the upturn
If you are a small UK business, then 2010 is the year to start thinking about growth and diversification.
That is the belief of Jo Behari, director of Home Jane, whose three-year-old home improvement business won a series of prestigious awards during 2009 including the Thames Gateway Business Award, as well as a place in the finals of HSBC’s Start-Up Stars Awards.
“I am reluctant to say spend, spend, spend… But if you see a good opportunity and it needs investment – then don’t waste it because of the economic climate,” says Behari, who diversified into offering DIY training courses last year. “If you spot a good opportunity or have an idea that needs investment, then now is the time to pursue it.”
Seize the opportunity
She firmly believes that small UK businesses should seek out new markets to take advantage of the economic upturn in 2010.
“You cannot rely solely on selling the same things to the same people, and should consider selling something different – but not totally different,” she explains, pointing out that lowering prices to boost sales is not a long-term proposition. “It is, however, important that you continue to focus on your core business, and make sure that your core values are respected.”
However, any form of business expansion must be accompanied by an assessment of the financial and strategic risks involved, as well as the spending and investment required.
Research is key
“Every business needs to make sure that it conducts the relevant research. If you are diversifying, you need to find out more about the products you are diversifying into and make sure that there is a market for them,” says Behari, emphasising that market research need not be costly, and can point a business in the right direction.
“It is also very important to devote time to considering how you are going to finance a new project in terms of the lending or financial arrangement you enter. You should never just pursue the first opportunity.”
Where to look for funding
Although business owners should contact their regular lenders, it is worth having that same conversation with business angels and high net worth individuals.
“There are a lot of business people with money to invest in sustainable businesses,” says Behari, adding: “Aside from private investors, you may also approach friends and family members - although you always should make sure that you have the appropriate legal contracts in place.
“Much will also depend on the relationship that you have with your bank,” she continues. “It is possible that it may not be lending so much to small businesses at present, but there are others, which specialise in this type of lending.”
For companies that opt to expand, it is also vital that they do so without jeopardising their existing financial positions.
“Cash is always king. You need to maintain your cashflow and this means keeping a close eye on monies coming in and monies going out,” says Behari, pointing out that good working relationships with both suppliers and buyers can play an effective role in cash management.
Keep your options open and be flexible
“There are no guarantees when you are running your own business,” she says, but adds: “You can manage that risk by being aware of your financial position and addressing things quickly. You also need to keep up honest and open communications with both your lenders and your suppliers.
“Business planning is really important,” she continues. “When you are running a business in a recession, you need a flexible business plan that lets you keep your options open. You need to keep it fluid, keep going back to it and keep doing additional research.”
For small companies, whose expansion necessitates investment in new capital, the costs can be mitigated by taking advantage of Government incentives.
“You should always be aware of the tax breaks you can take advantage of when buying new equipment,” stresses Behari, pointing out that a good accountant will advise on the best time of year to make capital investments.
“When you are looking to make a big investment in IT or training, it is also advisable to find out about the funding help that may be available. There are a lot of different grants and funding options open to small businesses.”
