If you own or run a business or are starting a business for the first time you have experienced some of the most challenging and changeable times for several decades.
The future is set to remain uncertain; it is crucial for businesses to have an agile strategy to build a #BusinessForTomorrow. Here are our five key areas to consider when reviewing your business:
1. CASH REMAINS KING
A number of businesses will experience pinch points in their cash flow management as their business begins trading again; working capital will have been eroded and delayed VAT and other payments will begin to fall due as Government support measures start to come to an end.
Businesses may find that they need to raise finance in the coming months. Debt finance including bank overdrafts and loans (including Government backed loans) is the most common source of finance for SMEs. However, there are other options available including equity finance business angels and venture capital/private equity investment.
Furthermore, staffing levels and capacity will have a direct impact on your cash flow and it will be important to analyse each area of the business and the requirement to bring people back to work as and when they are required or consider redundancies.
Cash flow was not just an exercise for the start of lockdown, you should keep reviewing and accessing your outgoings with a close eye on the cash coming into your business. You can link this up to a pipeline of the work you have coming in, to get a better prediction. Many businesses will not see cash shortages for some months to come.
Download our free cash flow templates by visiting bit.ly/haz-cash-flow.
2. ASSESS YOUR SUPPLY CHAINS AND REVIEW YOUR EFFICIENCY
Whether businesses closed or adapted operations to continue trading during lockdown, it is likely that most will now have a different look and feel to both their customer base and supply chain.
It is important for business owners to recognise these changes and, when planning for the future, incorporate them into their business strategies to ensure that they can run as efficiently as possible. Resources are likely to be limited and the challenges will be magnified where new products, new processes and new people have been introduced.
- How reliable are you suppliers?
- What are their lead times?
- How have processes and timings changed?
- Do you have alternative suppliers available?
Take the time to map out and audit your supply chain and routes to market to make sure you are delivering products and services as competitively as possible without carrying unnecessary stock or debt.
For many lockdown has provided the opportunity to review efficiencies, whether that be in manufacturing processes or workflow management and this is essential for businesses to adapt to changes hat have happened and are continuing to happen. How can you make your business more efficient to protect margins and/or improve your customer offering, to gain that competitive advantage? Planning will also help you to understand risks and opportunities, that you may face.
3. MANAGEMENT INFORMATION
Having the right data that provides meaningful insight into your business on a day-to-day basis will help you in understanding changes in your resources, financials and, more importantly, your cashflow. Having a proper understanding of what people buy from you and why will enable you to set he right KPIs.
A good forecast model will allow you to assess the impact on your business and plan accordingly; scenario planning will also help you to understand risks and opportunities that you may face.
Cloud accounting software features could really help you to understand your business in real-time. Xero’s business snapshot allows you to examine your business metrics so you can drive your organisation. It will also give an insight into profitability of your business by showing your largest costs, revenue streams and how long on average it takes for your customers to pay, allowing you to make well-informed decisions.
4. REVIEW YOUR BUSINESS STRUCTURE
It may be the time over the next few months to put a new structure in place which will assist in growing your business whilst mitigating the risks of a future downturn.
Introducing holding companies, demergers, and new group structures can all be explored as ways to create additional value and mitigate financial risk in your business.
Now may also be a good time to review your dividend and remuneration policies.
5. CONTINUE TO COMMUNICATE
It is important to maintain good lines of communication with customers, suppliers, staff and advisers to ensure that your business continues to run smoothly. Lockdown has emphasised the importance of online communication, through emails, social media and video conferencing, so it is vital you are using each medium effectively.
If your operations or processes are changing, have you informed your customers in a timely manner? The customer experience is important for both retaining your customers and encouraging them to recommend you, so make sure you are engaging with them regularly and making them feel valued by keeping them up to date with your changes and how it affects them.
At a time when people have been apart and many businesses look set to develop their remote working for the future, effective internal communication is vital for maintaining trust within an organisation and has significant impact on employee engagement, and productivity. Now would be a good time to look at your internal communications campaigns to make sure they are engaging your employees in your new goals.
If you are now addressing your business plans in order to build your #BusinessForTomorrow, please get in touch with one of our business advisers who will be happy to help.