The world economy is in turmoil, but Geoff Steer - a Founding Partner of Matthews Steer Chartered Accountants - says there are opportunities to get your house in order during tough times so you can accelerate into economic clear skies.
Staying focussed amid a barrage of bad news is critical for small business, and there is plenty of uncertainty about right now with European sovereign debt issues, possible US recession, inflation, a two-speed economy, high dollar, a possible China slowdown … the list goes on.
But uncertainty can actually create opportunities for good, well-run businesses because there will always be many not-so-well-run businesses that will either lose market share or fall by the wayside.
Some small businesses face considerable headwinds, especially industries such as tourism, small manufacturers, engineering firms and retail thanks to a high Australian dollar and weak consumer sentiment. But no matter what the industry, small businesses can take constructive steps to emerge from this uncertainty on top.
And remember that many businesses have been born, grown and flourished during tough times. For example, the online group buying/coupon industry – companies such as catch of the day and groupon – did not even exist a few short years ago and has been a huge success during a challenging time, showing that the right idea at the right time can still break through.
For established small business, a positive first step is to focus on what you can control. Sure, be aware of the news and the noise, but not beholden to it.
To maintain your focus, take the opportunity to review the following aspects of your business:
Understand all of the important numbers, such as your break-even point. Monitor profit and cash flow.
Review your budget. If your budget does not take into account fluctuations such as movements in the Australian dollar or the oil price, then consider modeling worst case scenarios for a sense of how your business will cope.
Review and focus on marketing strategies – when competitors are fearful to spend it can be a good a time to be out in the market place. Embrace and use the internet where appropriate.
Refocus on strategy – focus on niche strengths and the competitive advantage you have.
Review supply lines and the opportunity to source more cheaply eg: imports
Scrutinise cost cutting. I wrote in more detail on cost cutting previously; in short, it’s easy to start slashing when things aren’t going to plan, only to suffer from the cuts later on. If necessary, focus on the big ticket items and tread carefully.
Focus on efficiency – many large corporations used the GFC as an opportunity to reduce staff numbers and become more efficient.
If that’s not an option, get staff on board and challenge them. Try and get everyone pulling together to keep the business, and their jobs, going.
The businesses that keep their focus and are well organised will usually outperform their poorly organised competitors, particularly in times of uncertainty as we are seeing now. Only the well organised will be able to turn the uncertainty into opportunity.
Geoff Steer is a Founding Partner of Matthews Steer Chartered Accountants. Geoff’s knowledge of taxation matters combined with his financial planning skills enable him to provide a complete financial service for professional, executive and small business clients. Geoff was recently ranked one of Australia’s top 10 financial advisors by the AFR Smart Investor Magazine’s 2011 Masterclass. www.matthewssteer.com.au