In what is becoming a tradition this time each year we have been talking to SME business owners about the key business challenges facing them including customer experience, product and services innovation, staff productivity and sustainable profitability amongst other challenges and what they expect to have the biggest impact on their businesses during the next 12 months?
One significant new observation for 2018! As a generalised statement we believe 2018 will be a year where the “soft skills” of the business owner, sometimes called EQ will be just as important as the more traditional skills associated with managing a successful business.
Before we get into the top 10 business challenges for 2018 let’s take a look at the international business scene. To begin with the world economy in our view continues to recover with record low unemployment numbers in many countries, increasing confidence in business conditions and significant tax reform particularly in the US.
However, there are also a number of worrying signs for business owners with wages growth stuck below inflationary trends and a strong likelihood that interest rates will rise multiple times as the overall economic conditions improve. These trends continue to impact on the stock markets and property markets around the world that remain volatile. Now we have an added challenge with the US increasing tariffs on key steel and aluminium imports. Will there be a shift to reducing open markets in 2018 as a consequence?
Here in Australia the economy is continuing to grow with strong GDP numbers that economists pinpoint on population growth as much as improvements in productivity of the workforce. The challenges facing small business owners is not helped by governments at the Commonwealth and State level lacking the ability to deliver a business friendly legislative agenda largely due to timid leadership. The big issues for government are:
- Tax Policy,
- Employment Rules,
- Innovation Policy,
- Cyber Security, and
- Population Growth
In talking through these external factors with many SME business owners there is a feeling we cannot change these political challenges so best to get on with running our business focussing on our customers, staff and the use of new technologies to enhance staff productivity, improve the customer experience and build sustainable profitability.
We believe 2018 is already proving to be more exciting than 2017 for many business owners!
Accordingly here is our 2018 list of the top 10 business challenges and opportunities.
Top 10 business challenges facing small business owners in 2018
The pressure is on to deliver new revenue opportunities so “business as usual” with the same old product and services selection is now considered a business risk and threat to the long term viability of any organisation.
It doesn’t matter which industry sector you select the level of disruption and change in delivery of products and services is going to see many new entrants succeed whilst other traditional businesses will fail to keep up. Unless the business owner takes responsibility to implement a realistic plan to introduce new services and products with better use of technology that touches the customer then 2018 will end with a loss of customers and revenue. We are seeing it across the board.
The entrepreneurial business owners are also looking to engage with Government at all levels to secure R&D incentives and grants to fund their business growth. Understanding how to tap into these funds or tax deductions is both a challenge and opportunity. Getting good advice in this area is critical for the time poor small business owner wanting to turn innovative ideas into reality.
- Customer Experience
You cannot ignore your customer NEEDS. Associated with a more innovative approach to servicing your customers is the continuing emphasis on the overall experience. The key to winning new business and the retention of customers is not only providing great products or services but adding a great customer service experience as well. Even with great products and services if the customer is given a poor experience they may still walk over to the competitors. What strategies will you undertake to achieve this improved customer experience?
In a highly competitive market your customers have access to many choices and sources of information on literally any product or service. You cannot take a customer for granted in this environment and your customer retention strategies will be at the heart of your continued success. Without customers and the revenue generated your business is going backwards. The challenge is to attract, retain and maximise your customers?
In recent years the workplace has been changing firstly with increasing use of casual rather than permanent staff and secondly with greater focus on the culture of the workplace. For many business owners these changes bring new challenges including policies covering bullying, sexual harassment, gender equality in pay scales and the need for greater flexibility to work, particularly with the millennial workforce now assuming the largest staffing block as the baby boomer generation retires.
There are an increasing number of people offering advice on how to effectively manage your workforce. This trend will only continue to gather pace in 2018. Whether it is compliance with the Fair Work Act, WHS legislation or using 457 Visas to attract the best talent for your workforce the quality of your staffing policies and retention programs is going to be a significant new area of business risk and opportunity. I expect to see this business challenge close to the top of the list for business owners in the next few years. The “best of breed” business owners will see this as an opportunity and engage with the best advisors in the field to achieve a competitive edge over the competition.
- Marketing Plans
There has been more written in the past 12 months on this subject and it is hard to decide what to believe and what to ignore. To reach your target audience the marketing platform choices are almost endless with Direct, social, online, e-mail, traditional television, radio, newspapers and magazines to start with. Marketing comes in all shapes and images and perhaps the old fashioned networking and personal referrals will still be relevant for many small business owners in 2018?
Then there is what content to use! The challenge is to focus on story telling that enables your business to tell your story in a way that builds customer engagement. There are many who claim to know how to do this but successful campaigns require proven talent. When you find a great marketing partner it is like finding “the gold”.
- B2B Collaboration
As with Staffing we see this business challenge increasing in importance in 2018. All business owners must improve their negotiating skills with all stakeholders to achieve the best outcome particularly when a tough situation arises. A key point to remember, staff, customers and your supply chain partners like doing business with people they know, like and trust. A good colleague of mine has developed the KLT approach to business and I now use it with all my stakeholders in a very conscious way to build relationships and generate new opportunities.
Unfortunately for many small business owners there is never enough time to manage their existing business let alone have the capacity to network to build relationships as part of their new business program. The challenge is to make time to connect with new partners, business opportunities, market places, and new customers?
We have moved Cashflow management down the list of challenges and opportunities for 2018 as local Australian banks have come under increased scrutiny from government to introduce a fairer regime that is supportive of SME business owners. However, it goes without saying a business owner must maintain realistic working capital balances to manage the normal trade cycle. Without an understanding of your cash requirements and particularly where your bank is involved with loans, failure to meet the commitments can easily result in a good business getting into trouble.
Another factor with Cashflow management comes from larger businesses in your supply chain stretching your payment terms. The government has recently made changes in the legislation to bring focus on this negative trend. It will be interesting to see if this improves the lot of the SME business owner, particularly when it involves international supply chain partners.
As always, getting good financial advice and taking the time to analyse your business risks of failing to meet cash flow commitments before undertaking any new project is highly recommended.
- Workforce Productivity
In talking to many business owners there is a constant challenge to align the organisation culture with new technology and enhanced procedures. Without good leadership skills the introduction of innovation into the workplace will be defeated by “old culture” approaches typically along the lines of “this worked for us for years so why change now”. You need buy in from your workforce if you are going to achieve genuine improvements in the productivity measures you set for your team. Another way of approaching this challenge is to devise a plan to get the most out of the resources available to the business. In 2018 there are many new technology driven productivity tools that can be deployed but in the end the workforce has to have a culture built around great processes and customer service.
These fundamental challenges also represent a great opportunity – how do you use apps technology, new software and digital solutions designed to remove manual, time-consuming tasks and let the staff focus on creating value in the areas where they have the greatest customer impact?
- Business Processes
I still see too many business owners approach their business processes by making it up on the fly as they introduce new systems. Sadly, many business owners remain ignorant of all the processes involved in running their business which makes them very vulnerable when key staff leave or worse “go rogue”. The challenge is to make better use of processes involved in running a business by collecting the key business data in usable forms that makes it easier to monitor and take action irrespective of the staffing circumstances. We are going to be hearing much more about artificial intelligence and data management as business processes are broken down into components where robotics can be introduced. This is a big trend for 2018 and beyond.
Failure to manage the processes including sales, operations, manufacturing, procurement, distribution, marketing, HR, WHS and administration will inevitably lead to loss making and worse business failure. Often business owners are stretched across many business functions themselves to “save” money. Usually this is a big mistake.
- Lack of Time
Time available to think remains a constant in the top 10 challenges for all business owners. The mistake we see far too often for the average small business owner is that there is not a good use of the hours in a day. All owners are stretched for time so creating more time means saying NO occasionally and focussing on what is essential for success instead of chasing every rabbit down every hole.
This is where a smart business owner will engage with an Advisory Board or business mentor to focus on what is critical and what are distractions remembering to always maintain a sustainable work life balance to stay alert and not burn out.
- Sustainable Profitability
Always a key challenge and 2018 will be no different. Financial management skills are still lacking for many business owners. This remains a big frustration for me with too many otherwise successful business owners being poor financial managers. It is straight forward for anyone with financials skills to understand it starts with a formal annual budget, understanding the profitability of each client and the overheads required to generate a great customer experience as well as a sustainable profit margin. There is no point in having clients where you lose money in the process. How many times have I said this to prospects?
Business owners create wealth and grow their business because they understand how to build a culture where sustainable profitability is a given. As with cash flow many good businesses fail due to a poor understanding of client profitability.