This time four years ago, we were holding our collective breath and worrying about business continuity. For those of us who are optimists, the silver lining of business adversity is that it exposes us to the hard facts while providing occasion to correct weaknesses, learn and capitalise on opportunities presented.
In this article, we reflect on how difficult times so often inspire and create positive change that can enhance business success. That is, if you’re looking for it.
Even the most conscientious business owners were caught out back in 2020 on issues they hadn’t considered. However, despite the pandemic exposing weaknesses, many of the business issues (and opportunities) faced weren’t new. They have been, and will continue to be in future, central to successful business continuity.
We’ve reflected on business continuity planning on several occasions now, and it’s likely we’ll raise it again, and that’s because (and pardon the pun) it’s a ‘core’ pillar that underpins successful businesses.
Business continuity planning doesn’t need to be complicated. It should simply be a case of thoroughly understanding your business fundamentals and implementing practical measures that promote a better business operation day to day, then when the going gets tough, well considered contingency plans can be rolled out without delay.
In the past we’ve discussed five proactive business continuity measures, and they still apply. We encourage you to read about them here.
However, there are three key matters that foster good business practices now as well as continuity in future when things go awry, and they are diligent cashflow management, logical pricing and sound business leadership.
Diligent Cashflow Management
As business owners your first line of offence and defence, is cashflow management.
Smooth and predictable cashflow enables opportunities to be acted upon quickly. Conversely, by understanding potential cashflow shortfalls, shoring up alternative funding via pre-approved finance or loan structures can replace or prop-up cashflow until your particular business crisis passes or an opportunity is transacted.
If you were a Covid-era business leader who was in the habit of budgeting and diligently managing cashflow, which allowed you to clearly understand the amount of working capital necessary for operating efficiently during an emergency, it’s very likely you were among the business owners who rebounded relatively quickly when lockdowns eased.
Fast-forward to 2024, and if you were of those who were lesser-prepared and your cashflow planning remains haphazard, it’s time to make it an ingrained habit of your business management approach.
Why, because the next global crisis (or major opportunity) may be just around the corner.
Logical pricing
Directly following the worst of the pandemic, there were many reports of materials (particularly those for the building industry) increasing by 30, 40 and 50 percent. At that time, the disruption in supply chains meant businesses were compelled to pass on the increases, and if customers wanted the item, they had no other choice but to stump up the money.
Now that supply chains are mostly back to normal, for some business owners pricing remains a sore point. Some business owners feel so uncomfortable, they have deferred or avoided price increases altogether (at their peril). Others have done it covertly, hoping their customers don’t notice. They do, and they’re usually not impressed.
Price increases are a fact of business life and business owners need to review their pricing regularly. By that we suggest annually at the very least. Although we do recognise circumstances differ, and pricing may need to change more regularly – half yearly, quarterly or whatever is appropriate to the nature of the industry and marketplace.
Informed business owners know pricing directly relates to their gross business profit and direct business costs with the later requiring a review of its own.
Questions about operational efficiencies and whether purchasing practices reflect appropriate inventory levels; if the products are of good quality, represent good value with low failure rates, and importantly the supplier’s payment terms are favourable. Pricing processes must be logical and aim to meet the market while balancing acceptable profit margins with remaining competitive. However, higher than market prices will also be accepted when businesses demonstrate better value for their customers.
Sound Business Leadership
It’s a well-worn adage but you really do need to work on your business and this involves actively meeting and greeting customers and suppliers and mentoring and leading your team.
Leadership involves constantly looking for and putting yourself in situations that are out of your comfort zone.
Taking every opportunity to pressure test your business is part of continuity planning. You need to know what’s going to cause your business to fall off a cliff or know for sure if you have the resourcing necessary to scale it to new heights.
As we mentioned at the outset adversity inspires and creates opportunity for positive change, and good business leaders constantly look for it.
In our experience, effective business leaders usually come to us with ‘good’ problems. The sort that requires a sounding board for talking through what-if scenarios and benefit from our knowledge and experience for capturing opportunities and avoiding setbacks. We call that business continuity planning.
It’s also worth noting, it’s rare for a business to thrive long term with a burnt-out leader at the helm. Naturally, leadership and time management go hand in glove. If you’re feeling exhausted you need to delegate more. Trust your key employees and engage external advisers. You can download our 7 Habits of Successful Business Leaders here.
Next steps
Way back at the beginning of the pandemic, we sent our clients a suggested Business Continuity Plan.
May we suggest you dust if off and review it in context of the next global issue that may come our way, whether it’s another deadly virus, a natural disaster, cyber-attack, political tension or war that can quickly change conditions for local business owners.
Core Business Accountants specialise in business advice for growing and mature family-owned and small and medium-sized businesses. If you need business advice about any of the above topics, please get in touch with us on (07) 5438 8088, email mail@corebusiness.com.au or visit www.corebusiness.com.au.
