Despite predictions in the media, nobody really knows what life will look like over the next 12 months. The fact is, modern society hasn’t been through a global pandemic on the scale of covid before, yet with everything the world has endured in the face of never-before-seen challenges, most businesses are doing pretty well.
However, with a lack of certainty around the near future, they would do well to keep a careful eye on what’s happening, and adjust operations to suit. Those who can navigate the market and make quick decisions will be the most successful.
Ask yourself this question: is your product or service a necessity or a luxury? When funds get tight, consumers have no choice but to continue buying the things they need and to dispense with the things they do not. The opportunities for discretionary purchases such as meals out or new clothing become limited. If you fall into the first camp, it’s likely you’ll pass through the next couple of years with flying colours. If you’re in the second, read on.
Review your personal budget
How much income are you funnelling into the household? Could you tighten up on your personal expenses, a bit like the rest of the country? This review could show that you don’t need as much to live on as you thought – and allows a bit of “fat” within your business so if you struggle for a bit, you won’t feel the accompanying personal stress as keenly.
Consider your team structure
If your business income does start to drop, it becomes incredibly important that your team is as productive as possible. All too often business owners hang on to team members for far too long, thinking that things will soon improve. Managing a team can be scary, especially when claims against employers are a very real threat, but equip yourself with the skills to feel confident having difficult conversations and creating KPIs to track performance. If any team member is not contributing to the business profits, you need to rethink.
Take time to analyse what the business needs
For instance, do you need to be available seven days? Could you operate successfully on five days and reduce wages? Could you streamline your offering to better meet the needs of your customers? Consider getting professional support to help undertake a review.
Take a look at all your business assets
You might have vehicles that hardly get used, or equipment purchased for one particular job with the idea that you could build an income stream from it but never did. These large-ticket items all have a cost – insurances, loans, and declining capital value. Take stock of what you truly need and get rid of the rest; the associated cash injection might help improve cashflow and reduce your stress at the same time.
Analyse your bank transactions
I have lost count of the number of business owners who signed up for something and forgot they had done so. Check for memberships and subscriptions you don’t use; pay for only what you need. And are you paying down loans faster than you need to?
Prepare a cashflow
I often hear small-business owners say they can’t prepare a cashflow and would prefer to pay their accountant to do this for them. But it’s not difficult to do, and to be frank, when a business owner creates their own, it is generally more realistic than one produced by an accountant who can’t realistically fully understand the business. There are free templates available to help – including one within the Business180 How To Business module. A cashflow will give you certainty that you can survive the next 12 months in business if you meet the targets you have set.
Track your performance
Use a system like Xero to enter your budgets, set goals and hold yourself accountable to achieving them. Learn how to run regular reports that will show if you are on track. It can be a huge boost to your mental health to see in black and white that your business is delivering on what you wanted.
When times get tough, business owners tend to reduce their spend on quality advice and access free “pub advice” instead. But this can be detrimental in so many ways. Your drinking buddy might be claiming to be enjoying their best year yet, but in my view, nobody at the pub is ever 100% honest about their business’s performance. Take everything you hear with a grain of salt. Pub advice is often based on a fairy tale, and what your mates suggest may not be the right course of action for your business. Talk to your accountant before taking on any pub advice – because without guidance, it could cost you more to clean up the mistake than it would have to book an hour of your accountant’s time.
Review your pricing
Now is not the time to be offering discounts to get customers in the door. Financially, you are better off to sell less at full price than you are to sell more at a discounted price. Check your suppliers’ costs – many will have already increased their pricing, so make sure you increase yours as well, and don’t be embarrassed at the price point you charge to make a profit. If what you are selling is a premium product or service, don’t sell it for bargain prices. If your customer sees value in what you are offering, they won’t have an issue with what you are charging.
Set some time aside for yourself and your family
Don’t allow yourself to continue working 24/7. Your business, your family and your mental health will suffer if you fail to look after yourself. If you have a spouse or partner, have a regular date night every month and challenge yourself to not discuss the business while you’re out. If you’re a parent, the kids are out of bounds, too. It’s your relationships and friendships that are the first to be damaged when a business starts struggling.
Haylee Wrenn is an award-winning accountant and founder of online business programme Business180.