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Business Advice

How To Future-Proof Your Business In 10 steps?

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As the business landscape evolves, small business owners must remain agile and proactive in the face of economic uncertainty. Amidst current discussions of a potential recession and the ongoing rate rises and challenges of the cost of living, it is increasingly important to position your business for long-term success and stability.

To mitigate the impacts of these dynamic market conditions, you must take proactive steps towards future-proofing your business. This ensures the continued viability of your business and provides peace of mind and stability for yourself and anyone invested in your industry.

We’ve outlined ten concrete strategies that small business owners can employ to future-proof their businesses and thrive in economic challenges.

1. Plan your end goal.

First, it is to know what you want from your business. What is the future you are proofing your business for?

For example, If your intention as a business owner is to leave the business and travel six months of the year, then you need to have the structures in place that will allow you to do that. You may need a competent manager, policies and procedures for employees to follow and transfer all your responsibilities to another entity so the business can keep operating efficiently.

Alternatively, if you plan on working until retirement, what would your succession plan look like, or would you grow the business to sell?

Have a clear end goal, then plan the steps and insert the frameworks to get there.

2. Have clear policies and procedures.

Ensure clear written guidelines are followed for all tasks or flow charts for processes.

An example Michael Brennan from Clout Advisory presents is one of a family-owned and operated business where “Dad holds most of the knowledge and running of the business in his head. Suddenly Dad passes away. What do you do?”.

Clear policies and procedures mean that even if the most knowledgeable person is not contactable, there is a reference point for the next steps and how-tos. This also ensures the correct actions are taken and that no steps are missed by accident. 

3. Have an appropriate business structure

How the business is structured internally is essential to prevent more significant issues as the business grows. 

The proper structure for your business will impact your operational and legal risks, asset protection and tax obligation; therefore, it must reflect your future goals and growth plans.

Each structure requires different costs, commitments, and tax considerations. Changing your business structure as you grow is possible, but this process is often complex and expensive process. 

If you want to know more about different business structures, read HERE.

4. Have a robust and transparent employee structure.

A business’s employees are its greatest asset. How your employee system is structured is critical. It indicates what roles are needed to make the business operate. 

In a small business where the owner often serves as the CEO, it may be feasible for one individual to oversee multiple departments. However, an effective organisational structure should entail clearly defined job responsibilities and roles for each position. This ensures smooth operations and reduces confusion and overlap of tasks.

This increases efficiency, and your business will start running like a well-oiled machine.

5. Have internal solid controls.

Future-proofing involves creating as many check-in points as possible to prevent unexpected money loss. Internal controls ensure all the resources are in place for a particular action.

An example would be having a secretary as a signatory on the bank cheques. This may seem convenient until double payments are made, or the risk of fraud is actualised. 

A rudimentary internal control is to ask yourself twice. Do you need that new Hilux? Can you afford to put on another staff member? 

Have a double-checking step to question all the purchasing decisions twice before paying. Is it contributing to the bottom line? And if not, you shouldn’t be doing it. 

6. Stay on top of business operational expenses.

It would be best if you were across all your current business operational expenses that accumulate, such as employee super payments, ATO debt, and your creditors.

In the insolvency industry, the ATO is called the silent creditor. Because of the ATO’s slow processing, businesses don’t receive constant notices and, therefore, don’t pay. Suddenly, there’s $100k owing to the ATO. 

7. Manage your debtor’s list.

Your debtor’s list is another section of accounts that can impact your cash flow.

Ensuring you haven’t got a long debtor’s list is essential. Circumstances become aggravated when you cannot receive payment from debtors, then, in turn, unable to pay your creditors. 

How old are they? The older the debts are, the less likely you will recover them. 

What frameworks do you have in place to ensure the debts are collected? 

8. Ensure a sufficient Profit Margin.

Counter to managing your debtors is managing your income. How much does it cost to provide your product or service? What is your Profit margin? Has the cost of materials increased? Are the margins still covering overheads? 

A product-by-product review of costs and pricing is the best practice to ensure items are profitable and debt is covered. 

To learn more about calculating your profit margins, click HERE.

9. Use accurate future business projections.

Cash flow projections are simple, but more businesses must make accurate predictions.

Small amounts paid for subscriptions and licenses can be overlooked. But by analysing it, you realise you’re wasting a tremendous amount of money and not even putting it in your cash flow.

Optimistic income projections can also sabotage cash flow forecasting.

For example, many trades work by tenders, but without any obligation to pay, no matter how high the chances are of receiving the job, a tender is not a signed contract to confirm future income.

10. Get quality professional advice

Clout Advisory has seen many businesses at all stages of maturity end up in rough waters due to the lack of future-proofing and the perfect storm that economic crises create for small business owners.

Receiving the right advice for the problem can result in a fast bounceback and a solid foundation for years. 

If you would like to talk to an experienced business advisor who can assist you in future-proof your business, contact us at 1300 886 006 or email us.   

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