Laura Rogers, Partner at Fordham Business Advisors, discusses management initiatives which businesses can consider implementing in today’s tough market. To hear more about business issues from Fordham, Partner Stuart Le Cornu will present a seminar, Small Business Restructuring: Practical Guidelines, at the 5th Annual Small Business Tax Essentials Conference on 27 May.
Introduction
The next six to 12 months are forecast to be one of the toughest periods that Australian businesses have experienced since the Global Financial Crisis!
There are signs that the local economy is declining as a result of political uncertainty, regulatory change in the Finance and Insurance area and the current Banking Royal Commission. This has led to a lack of consumer confidence and intense market competition. Lenders are becoming firmer on their lending criteria and we can expect much stricter governance of businesses, with finance companies demanding more financial information, more often.
In response to the many calls from clients asking “What can I do to maximise my trading results and survive in 2018/19”, this article focuses on Business Management Strategies in a Tough Market.
Whilst we will highlight management initiatives over which you have control and which are applicable to all businesses, we remind Owners to address not only the financial position of their business, but also to review the planning strategies and positioning of their business in its market.
Heed the warning signs
But for a few, most business collapses can be attributed to the failure of operators to recognise the warning signs of the onset of financial problems.
Warning signs include:
In tackling these warning signs, management’s first challenge is to take stock. Owners need to identify and manage any weaknesses in their business whilst not being blind sighted to any new opportunities that might emerge.
Taking stock of your business means:
Measure and measure again!
A simple daily operating control (DOC) or Dashboard which tracks your sales, gross margin and major expenses, together with inventory levels, debtors and cash at bank is enough to track the pulse of your business.
Tip: Create graphs showing these indicators and update them daily. It will quickly show you any adverse trends when they arise. You can’t fix a problem 2 weeks ago if you only know about it today!
Knowing and satisfying your existing customer base
Business begins and ends with the requirements and behaviours of the customer. Once your customers are dissatisfied, then the rest does not matter! Adopting superior customer retention strategies not only allows the business to prosper from existing customer loyalty and satisfaction, but also provides the platform for a ‘business referral base’ from your existing happy customers.
Tip: Utilise your customer database to identify sales opportunities and implement retention and loyalty programs to see your customers return.
Take corrective action but for all the right reasons!
This is one of the most difficult parts of business decision-making in a tough market. Whilst the aim may be to boost profitability, many businesses which solely adopt ‘cost cutting’ strategies are left ‘cash’ starved and unable to invest in stock or promotion. A more proactive approach to the business recovery may be to keep striving for underlying improvements in the business, rather than just cutting costs. This type of approach will also build stronger infrastructure which facilitates longer-term success.
Tip: Consider how your business could increase gross profit by $100 per unit.
Attitude – effective leadership and motivation of your people
One thing to always remember is that the Owner is the leader and people look to that person for leadership and motivation in difficult times. Talking up a ‘doom and gloom’ attitude is not the answer. You need to consider new angles, listen to others in your industry, seek expert advice but above all, always be flexible. It is important not to do what you’ve always done – particularly as these actions may have got you into your existing ‘stressed’ position.
The best run businesses adopt these sound business practices during the good times as well as bad, in order to maximise their return, and of course, to minimise risk.
What actions can you take now?
After taking stock of your business, there is now the need to address specific areas in the business cycle. The attached ‘Checklist for managing businesses in times of financial difficulty’ addresses the business cycles relating to:
We hope that the attached checklist can be an effective tool in managing your business in these uncertain times.
Disclaimer: This article is general in nature and its brevity could lead to misrepresentation. No responsibility can be accepted for those who act without first consulting and obtaining specific advice.
Laura Rogers is committed to delivering outstanding client service and solutions that are personalised, commercial and innovative. She achieves this by thoroughly understanding her clients’ aspirations, both business and personal. Joining Fordham as a graduate in 2004, Laura quickly developed her skills and expertise as a leading member of the firm. She is passionate about her work and credits this to her clients who have made her experiences exciting, challenging and rewarding. Committed to helping private business owners to grow and improve their businesses and their personal wealth, Laura has had the opportunity to work on a variety of taxation and business matters across a range of industries. She assists her clients with owner and business strategy and planning meetings, profit improvement workshops, dealership management workshops, valuations, sale of business, succession planning, structuring, tax advice, compliance, financing and wealth planning. She takes pride in being able to easily develop solutions that are personalised as well as technical. Laura is also a keen driver of excellence throughout the firm, and a significant contributor to the firm’s in house excellence group for business. She is a valued contributor to the development of best practice ideas for the Fordham Motor Dealer Services Team, leading the development of the Automotive Financial Management Program for clients and their managers, facilitating dealer profit comparison meetings and presenting on industry best practices. Contact Laura at lrogers@fordhamgroup.com.au or connect via LinkedIn
You can also connect with Fordham Business Advisors via LinkedIn