Business Advice

Consequences Of Ignoring Future-Proofing: Expert Advice For Small Business Owners


As an insolvency practitioner, Clout Advisory Director Micheal Brennan has seen many businesses at all stages of maturity come across his desk due to the lack of future-proofing. 

Quite often, businesses that don’t have a future-proofing strategy are more vulnerable to the perfect storm an economic crisis creates for many small businesses. 

An ideal time to future-proof a business is from inception or shortly after the company’s launch.

Whether buying a business or starting a new one, putting the appropriate future-proofing frameworks in place early prevents stagnated steps while establishing a firm foundation for growth and resilience through harsh economic conditions.

Alternatively, another optimal time to review and implement future-proofing frameworks is when a business is about to go through a significant change or experiencing rapid growth. 

Future-proof for business growth.

Being at the stage where your business is flourishing, and you would like to expand is an outstanding achievement for any business owner. But “growth” can be a dangerous word in the industry. Growing too quickly or without the correct structures can adversely affect profitability, so one must have a system to leverage for business growth.

Michael Brennan from Clout Advisory explained this happens when businesses try to grow without doing the appropriate checks or being methodical.

“Businesses in this situation may be overstaffed or take on too many jobs with limited resources. As a result, craftsmanship and quality control are impacted, leading to refits and rectifications that eat into profit margins. 

“The quality of material may take a hit, and much of what the business has built starts deteriorating. As a result, the business could end up making less money,” he said.

“Whereas if growth is done in a systematic way, it’s far more sustainable. And then, you can do it in alignment with your end goal, whatever that is for a business owner. “

Future-proofing is based on the end goal of the business owner. Suppose the owner wants the freedom to play golf a few times a week whilst the business is turning over rather large contracts they need to oversee. In that case, they need to plan for that well to avoid disruptions to daily operations or reduced profit margins.

Alternatively, they need to structure a business that will not be as reliant on them to allow for golf time. 

Consequences of not future-proofing.

Besides the apparent worst-case scenario of potential insolvency, there are many consequences a business could face without implementing future-proofing frameworks. 

Without working toward a pre-planned end goal, the business may end up in an undesirable position. Growing a business to leave behind a legacy requires a succession plan for the company to continue past that of the founder. 

Each business structure requires different costs, commitments, and tax considerations; therefore, an inappropriate arrangement could result in massive income losses with many more regulations than necessary. This prevents growth and hinders profitability. 

With incorrect support structures, businesses put themselves at risk of not completing jobs at a high quality or on time. More delays and workloads could result in unhappy customers and staff. As well as open the company up to fraud and legal actions. This could result in a lack of repeat customers and a high staff turnover.

Another worst-case scenario is if a family business’s managing director or founder dies and no processes and procedures are documented. Would all work in progress stop due to the “next in line” being unable to maintain consistent operations and fulfil the duties left by the deceased founder? Does the successor even have access to all the login information of the business systems? 

Prevention is better than cure.

The lack of future-proofing can severely affect businesses, especially during external economic stress. 

Seeking strategic advice from a professional business advisor can prevent stagnation and establish a firm foundation for growth. 

Whether starting a business or experiencing growth, putting the proper framework in place is vital. While focusing solely on the present may be tempting, investing in future-proofing measures is essential for long-term success and survival.

If you want to chat with one of our experts, email admin@cloutadvisory.com.au  or call (02) 6650 5888.

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