How to Survive and Thrive in a Changing Economy
Sometimes business is simple, but other times not. When next year looks like last you can reasonably accurately forecast that unless you make changes your business performance next year will look a lot like last year. You might be able to tweak this a bit, trimming some cost here, improving a margin there, but overall the past is a pretty good indicator of the future.
When next year doesn’t look like last year – or where we are right now, doesn’t look like any other year ever! – chances are your business will look different too. Will that be good or bad? Will your business fail, survive or thrive? Let’s look at some tools you can use to forecast the future, and what to do about it.
Let’s start with surviving: you need to be able to plan for the coming year: you know I’ve been banging on about cashflow since the beginning of the Covid-19 crisis (and for those of you who really know me for at least the previous two decades!). I’ve been doing this with good reason: positive cashflow will always mean the difference between survival or failure, especially in rapidly changing trading conditions.
To stay on top of your cashflow, start by preparing a budget for the year ahead. By all means use this year as a starting point, but then make changes for things you know will be different, estimates are fine, even educated guesses where that is all you have. For example where can you generate additional revenue? How can you speed up the conversion of that revenue into cash? What does your marketing spend look like? What about staffing costs? What will your business look like once Job Keeper ends? Plan for a couple of scenarios for the coming year “most likely”, then maybe an optimistic or a pessimistic view (depending on your preference). If you use a tool like Calxa, Fluidly or any number of other apps creating multiple budgets and these into a cashflow forecast is a snap! If you’re not and you want to, please let me know, we can implement these easily for you!)
If the forecast is for failure – you need to act NOW. What can you do to avoid this happening? Revisit your plan? Revisit all of the elements you control – staffing levels, marketing, pricing and so on. The sooner you start any corrective action, the better your chances of turning failure into survival. Keep at this till you are confident you have a realistic plan that gives you the result you need. If you need help on this ask for it – there are lots of resources available for small business.
If the forecast is for survival, move to planning how to ensure that is what happens – have an “act, measure, adjust, repeat” process in place.
Now how about thriving? Once you have your survival budget in place, look at what you can do differently, where can you grow your business? Can you attract new clients? Can you generate more revenue from existing clients? What do you have that they need (and are willing and able to pay for) in these economic conditions? If you can tap into ways to grow your business – which even in a downturn is possible – you can more than just survive. Look at your costs? What can you do cheaper or smarter? How can you further improve the performance of your business?
Viridity offer services that help you know exactly how your business is trading. If you need any assistance putting a budget or a cashflow together please contact me or the team. If you need any assistance putting in place systems or processes to give you accurate real time measurement of how your business is performing against budget, we can help there too. If anyone you know could benefit from any of the services we offer we’d love to get an introduction.