Operational management pains abound after the initial start-up phase. For small business founders, it is often easier in the early stages of business to keep up with the demands – both anticipated and unanticipated – concerning landing new customers and fulfilling orders. As your business grows, however, these pressures on your time can escalate dramatically.
Before long you may find yourself needing to hire more staff, sourcing additional suppliers and delegating responsibility in order to keep up with all of the operational responsibilities that go along with running a business.
This is a critical phase in your business’s life cycle – one that requires careful planning and execution if you are to solve operational challenges to keep your company running smoothly.
The Harvard Business Review (HBR) identifies these key factors related to the business that change in importance as the business grows and develops, and are prominent in determining ultimate success or failure:
- Financial resources
- Personnel resources, relating the quality of people, particularly at the management and staff levels.
- Systems resources, in terms of the degree of sophistication of both information and planning and control systems.
Your best defence in avoiding failure, is to identify your biggest challenges and manage them.
Challenge 1: Managing your finances
HBR advises asking the following questions when addressing your finances at this stage of your business’ lifecycle:
- Can we, at a minimum, generate enough cash flow to stay in business and to finance growth to a size that is sufficiently large, given our industry and market niche, to earn an economic return on our assets and labour?
- Will there be enough funds to satisfy the great demands growth brings (often requiring a willingness on the owner’s part to tolerate a high debt-equity ratio) and a cash flow that is not eroded by inadequate expense controls or ill-advised investments brought about by owner impatience?
- Do we have a favourable cash flow forecast (or a large sum of cash on hand)?
Challenge 2: Managing your people
HBR notes hiring managers with an eye to the company’s future rather than its current condition as a key consideration during this stage of running your business. Along with making sure the basic business stays profitable, it’s important that your business develop managers to meet the needs of the growing business.
“Hiring smart people with complementary skillsets is necessary to make the most of your company’s potential during this phase, and so any good founder will be spending a lot of time directly involved in the recruitment process, especially of senior personnel,” says Neil Petch, chairman at Virtugroup.
Challenge 3: Managing tax compliance
The legal implications of not keeping abreast with laws and regulations could cost you more than a hefty fine – it could mean business closure.
If you are not well versed in the requires, it could result in costly financial and tax mistakes that could have been avoided by seeking the assistance of a qualified accountant or tax professional.
Ensure sustained business success
Although, you’re facing adversity, successful entrepreneurs have dealt with these challenges and are thriving today. How? They have learned to manage their finances well, finding employees and retaining them, and they abide by laws and regulations.
1. How to manage your money better
Why manage your money better
Inconsistent financial planning, chaotic bookkeeping, overinvestment and limited cash reserves are habits associated with poor financial management. You risk your business floundering in the event of an unexpected expense or a quiet period. Failure to get your business’ finances in order means you may struggle to pay your bills, get into debt, and – as a very last resort – eventually be forced to shut your business down.
How to manage your money better
The better your understanding of your business’ finances and cash flow, the more prepared you’ll be to make smart money management decisions. You should know the basics of business accounting. This way, you’ll know what your bookkeeper or accountant is talking about, and make more informed decisions.
One of the critical decisions you’ll have to make is where and how to invest your growing funds. A good idea is to invest in an account like the Business Flexi Advantage investment solution where you’re still growing your money, but also have access to a portion of it, should you need it.
As you continue to expand your operations and become established, handling your money matters can be made easy by signing up for a service such as Business Online. You’ll get up-to-date banking information directly to your computer, and a comprehensive view of your business’s transactions to help ease your decision-making and financial management processes.
2. How to secure good managers
Why you need good managers
Settling into your role as head of the company means you can’t be everything for anyone anymore. At this stage, it’s essential to establish a highly qualified team is going to be taking over a great deal of the responsibilities that were previously tightly under your control.
Finding the right mangers for you
While you’ll still be on the front lines your role is expanding and it’s up to you to start establishing order, cohesion and mobilise teams according to goals that have been clearly predefined and communicated. This will have a knock-on effect throughout your entire business, because the bottom line is: “Your number one customers are your people. Look after employees first and then customers last,” says Ian Hutchinson, author of People Glue.
Look for a combination of characteristics in the manager you select. Experience, maturity, dynamism, forcefulness, and able to do the job for you. Ideally, you'd like to hire dedicated and honest management as well.
Entrepreneur Magazine suggests including strong tests of character and skills to your search for the right person. In order to do this, you should:
- Determine what it is that your business requires and what is really important
- Write down what it takes to run the day-to-day management, both from a skillset and character trait perspective. Do you need someone who is conscientious in following directives and executing on tasks or are you looking for an agile, creative lateral thinking individual who can help you unlock opportunities to grow your venture?
- Looking ahead to the future, try to anticipate how these requirements may change and your business grows. If you’re able to foresee these changes, add those requirements to the description of the person you're looking for now.
3. How to ensure tax compliance
The importance of being tax compliant
Tax season only comes around once a year, but the tax process and the required tasks, payments, and considerations associated with the period have implications all year long.
Know your laws. Know your rights and obligations, advises Monisha Prem, corporate advisor, admitted attorney at M. Prem Inc, and author: “In this way you mitigate risk to yourself, your business, your employees and your customers. If done well, it helps to improve business performance and ensure financial success.”
Ensuring that you are tax compliant
Understanding where your business falls for taxable income thresholds and ensure that you are meeting your tax obligations. Also be aware of tax exemptions you may qualify for.
How to become and remain tax compliant
SARS has developed a system for you to manage your business’ tax compliance status. In order to be tax compliant you should make sure that:
- Your tax returns are up-to-date
- No money is owed to SARS, unless a payment arrangement or suspension of debt has been agreed upon
- You are registered for all the tax products that you are liable for
- Your registered particulars are updated
- You have either merged (via the Merge tool on eFiling) or declared (on the ERC01 form available on eFiling), all your registered tax reference numbers.
As a business owner, you pay salaries, commissions and other remuneration to your employees, and if it’s above the tax thresholds, you must register with SARS for employees’ tax purposes. This becomes more complex as you add more employees to your payroll. Refer to SARS website for considerations for business owners
Ensure that your record keeping is in line with SARS requirements. Keep records that will help you prepare complete and accurate tax returns – these records must clearly reflect your income and expenditure.