When distinguishing successful SMEs from those that go under, luck or talent doesn’t play much of a role. Instead, it would be best if you looked at factors like planning ahead, adapting to change and management.

In this blog, we explore eight of the most important factors that can determine success or failure for an SME and how data insight can be used to help surmount these challenges.

The Importance of Strategic Management

Let’s kick things off by discussing the role of a business plan. Essentially, this is a roadmap that guides a company towards its goals. Typically, a business plan would include the SME’s vision, goals, strategies and SWOT analysis. The SME would find itself lacking direction should a business plan be ineffective, leading to confusion and uncertainty.

To prevent this from happening, SMEs should invest time in creating a business plan that covers all corners of the business while regularly reviewing it and updating it to adapt to changing market conditions.

The Need for Market Analysis

With global marketplaces being more common than ever, having a grasp on the competition is crucial. SMEs are not just competing with other local entities just around the corner; there are international rivals with established brands and far more resources. At first glance, this may put those managing SMEs on the back foot, but continuing to ignore this can lead to customers being lost, as well as dwindling market share and profits.

To avoid this, make sure to analyse your competitors consistently. You have the ability to concentrate on their strengths, weaknesses, and strategies. From this, you can generate ideas for your own distinctive selling points and separate yourself in the market.

The Role of Technology in SMEs

It cannot be denied that technology is beneficial in various aspects, be it for enhancing productivity, efficiency, or improving customer relationships. Furthermore, technological innovations can make new markets available and present opportunities. Without appropriate technology, SMEs cannot pursue such opportunities.

Invest in technology to stay competitive with your competition. You will also want to know the latest and greatest within your industry and invest in tools that match your needs and budget.

Ineffective Financial Planning

Poor financial planning will likely make each day’s transaction more difficult than it needs to be. This could also lead to a cash flow crisis, insolvency, and potential bankruptcy.

The only way to prevent such a scenario involves regularly keeping track of cash flows and, if needed, taking expert advice. You can follow reliable methods or find one using past data and patterns.

Excessive Centralisation

This is where you find that one person monopolises all the power as far as decision-making is concerned. The approach comes with great risk; say that person suddenly becomes unavailable for a long time; how are decisions made then? Needless to say, this could stifle growth and innovation.

The best way to combat this is to build trust in your team and delegate responsibility. Encourage qualified team members to share their perspectives and divide workloads among their peers.

Desire for Instant Gratification

The success of any SME requires patience and a long-term outlook, so you’re naturally going to end up disappointed if you are expecting quick results. It can also demoralise your team when they’re overworked and set unrealistic goals.

Instead, focus on organic growth rather than running for the top. If you are one of the few fortunate ones to be in a position where you are making profits early on, make sure that those earnings are reinvested into further improving your operations and offerings.

Lack of Clarity

Just about everything in life is easier and more confident when you know where you’re going. Similarly, in business, clear goals and objectives help the stakeholders drive SMEs toward success and are a yardstick for measuring their performances. Lack of clarity will result in SMEs wasting resources on inefficiency and a lack of focus.

After that, you set SMART objectives, discuss them with the stakeholders, and ensure that the latter clearly understand what is to be achieved. You may go one step further by monitoring this process on a regular basis and adjusting whenever necessary.

Introducing Data Insights for Forecasting

Having just covered the factors that can cause SMEs to fail, let’s now focus on how data insights can be applied to address the challenges mentioned above. A keyword in all this is forecasting; this is where you use data to drive strategic decisions across valuable areas of a business. Let’s look into some specific areas in a bit more detail:

Sales Forecasting: This includes using data to predict future sales, which helps in inventory management, setting up prices, and developing a marketing strategy.
Budget Forecasting: It will help you estimate your future income and expenses, set realistic budgets, and gauge your performance.
Cash Flow Forecasting: With an idea of when you expect cash to be moving in and out of the business, you will manage your funds effectively and plan for contingencies.
Revenue Forecasting: You can project revenue streams to determine the most feasible approach to consider concerning pricing, product offerings, and distribution strategies.

Overcoming Hurdles with Pulse

If you need help compiling data to help with cash flow planning, check out Pulse. Pulse delivers data-driven insights on an intelligent dashboard, mapping out all the data you need to make financially sound decisions.

Once you have connected your bank account and accounting package, you can view key financial data: turnover trends, gross margin, management accounts, and so much more. What’s more, it’s all wrapped up in a tidy user interface, so you can share data and collaborate easily with stakeholders to better understand your business finances.

Take control of your finances and sign up for Pulse today!