Whilst the economic outlook still remains uncertain it is precisely now in the cycle that businesses must plan their future and their finances so they do not get left behind as the environment improves. So what action should a business be taking now in order to stay ahead?
ALIGN THE BUSINESS BEHIND SOLID STRATEGIC OBJECTIVES:
The strategy is not about doing more of the same and hoping for a better outcome. You need a clear vision for the future which must be well communicated and driven through to the front line. Review your business plan and ensure it still reflects key aims. Put risk management at the heart of the business by identifying and taking action against risk so better decisions can be made.
MONITOR THE EXTERNAL ENVIRONMENT:
You cannot change it but you can work with it. Know your marketplace inside out, keep well informed as to competitors’ strategy, do your research, and differentiate. Be regulation aware in terms of both that directly impacting your industry and schemes available to make your life easier.
FOCUS ON CASH MANAGEMENT:
“Turnover is vanity, profit is sanity but cash is king.” Ensure working capital is working for you. Every business is currently being pushed to its limits as suppliers press to be paid immediately and debtors take longer to settle. Stick to your set repayment terms and chase what is due to you. As the economy starts to recover there will be even greater pressure to increase working capital to meet demand. Target sustainable cash development and a diversified client base to maintain it.
MONITOR KEY DRIVERS SPECIFIC TO YOUR BUSINESS:
Maintain quality management information so drivers can be clearly understood. Sophisticated IT systems do not necessarily guarantee this insight. Focus on what information is gathered, the way it is gathered and how it is processed, presented and used. Drivers will likely be a variant of sales, costs or working capital and differ between close competitors or even parts of the same business e.g. a prime geographic location may be key to one retailer/division but not to another.
FORECAST AND RE-FOREST:
A scientific approach to the future will enable you to be more pro-active in pursuing opportunities that will generate cash. Revisit forecasts as new data becomes available or in response to external forces. Also frequently review the level of detail contained in forecasts to ensure they remain fit for purpose. Review borrowing requirements and if you are likely to need additional finance or covenant compliance is tight then contact financiers early. Use forecasts to consider restructuring borrowing to improve risk and cost.
Make effective use of resources, cut out unnecessary processes and do more with less. Develop a clear understanding about what is a sustainable level of cost efficiencies in the medium term and implement these. Be selective on capital spend but not to the detriment of the business and seek value for money and negotiate. Achieve greater profit from the cost base by driving savings direct to the bottom line or by redeploying resources to more profitable activities.
REVIEWS STAFF LEVELS:
Review staff levels particularly if cuts have been made. If necessary, and affordable, get essential talent in early before the best go elsewhere. Consider outsourcing and other flexible options to keep your fixed cost base low but only if this logistically works for you and quality is maintained/ improved at a fair price.
Get your name out there but before you do ensure you know exactly who your prospective customers are. Marketing may have taken a back seat over the past year but you should now be considering training staff in this regard and planning fresh routes to market. Management should also seek out and explore new networking opportunities. If your business spans the nation/globe remember the timing of the recovery and therefore market response will differ between locations.
Build and maintain relationships whether this be with your banker, accountant, suppliers or clients. Remember it is more cost efficient to retain a loyal client than to constantly chase new ones, particularly in an environment of spending cuts and increased taxes, so look after the clients you already have.
If you understand how your business is faring today you can assess prospects for when the market returns and plan your steps to achieve realistic goals.