Small businesses are the heart and soul of the Australian economy, accounting for about one third of the total Gross Domestic Product (GDP) and employing over 40% of the total Australian workforce. They provide many of Australia’s essential goods and services and are key contributors to our export industries.
A competitive environment
Small businesses operate in competitive markets, both with each other and with larger corporations that have greater resources and leverage but less ability to adapt quickly.
Large businesses have traditionally had the people, time and the finance systems needed to evaluate the financial and operational measures that drive business profits, giving them a key competitive advantage.
However, as cloud accounting has become more advanced and affordable, this advantage is now within the reach of small businesses.
Tools to drive better profitability
Small business owners need to ask themselves what really drives their business and bottom line profit. Asking this question will enable you to focus on using the diagnostic and reporting tools available to help drive better performance and better results. Not knowing the answer straight away is not a problem. What’s important is taking the time to understand it. A discussion with an experienced and objective advisor can enhance the value of this process and give you clarity on what to focus on.
Tips for small business owners
Small business owners possess a strong passion for their business activities. They live and breathe their product and service and take pride in their ability to provide the best to their customers.
The aims of large businesses are not always the same – they are typically more focused on delivering short term profit targets to their ultimate owners, be they shareholders or a larger foreign-owned entity. However they are structured to ensure time and resources are dedicated to essential business development activities which heavily contribute to the success of any business.
Some of these business practices are outlined below. As a small business owner, how many do you make time for? Consider implementing some of these to maximise your bottom-line and ensure you remain competitive in your marketplace.
- Development of sound accounting practices and internal controls
- Development of an annual budget
- Review of regular management accounts against budgets
- Analysis of the business’s customer base dissecting it by profitability
- Segmentation of the business’s products and services by their profitability
- Understanding and addressing customer wants and needs through regular feedback and communication
- Pricing products and services to ensure maximum utility is achieved
- Developing a sound sales and marketing plan
- Setting goals and monitoring progress of their achievement
- Ensuring there is a succession plan in place
- Having an independent person sit on monthly meetings to evaluate business performance and hold management accountable.
At Accru, through our Business Advisory service offering, we endeavour to help our small business clients achieve their goals and maximise their performance. An Accru Advisor would be happy to discuss any of these ideas or strategies with small business owners.