“Every economic indicator is weakening.
Inflation has been below stall-speed for almost four years.
Growth is sputtering, at its slowest since the financial crisis a decade ago.
Wages growth has stagnated to near all-time lows.
Retail spending is in reverse.
Household debt, meanwhile, remains among the highest in the world.
The one area of relative strength in recent years — employment — also has begun to deteriorate”
This is the recent coverage from Australia’s ABC, but a similar story can be heard in many countries around the World. Much like the changes to our climate, the global economy is sailing uncharted territory, with many traditional indicators telling a confused and conflicted story.
Don’t plan to fail
If you are a small business, what does this mean for you?
Are you already feeling the pressures? Is your forward order book strengthening or weakening?
What plans have you got in place to not only thrive, but more essentially survive in the current economic climate?
It’s not all doom and gloom. There are a growing number of opportunities for businesses, as the new World economy emerges from the old. New business models are being created, new alliances formed, and technology advances will impact every one of our jobs and businesses.
All businesses have an option of looking ahead, seeing the roadblocks and challenges, and planning a route through.
There are many opportunities to start and grow your business; you’ll need to get the right lens on your business to see them.
I’ll ask you a different question.
Do you feel equipped to ask the right questions of your accountant, or whoever helps you with your business planning, to get the answers you need?
Your strengths in your business might lie in your product or selling expertise and you leave the finances to your book-keeper or an annual review with your accountant, as he’s calculating your tax bill.
A large proportion of early-stage business owners don’t have knowledge or experience of business finance and how accounting statements can be used to drive their businesses forward.
A recent survey conducted for RUOK indicated that 40% of small business owners are stressed about their businesses, and 32% of them cited their business finances as the main stressors.
Other global and Australian research shows:
- 88% of businesses struggle with cash flow
- Only 1/3 businesses declare a profit
- Running out of cash consistently ranks in the top 3 (or 5) reasons for business failure within 3 years
My own mission is to reduce the rate of business failure through a lack of basic accounting and finance knowledge, and the confidence that comes with that.
Take the initiative for 2020
What can you do?
Build your business plan:
Having a well constructed business plan will be a major contributor to reducing your stress levels and giving your business a better than equal chance of survival.
What will a business plan provide for you?
- A chance to document the moving parts of your business and assess whether they are working well
- A chance to set objectives for the period ahead – (I would recommend 3 years with closer targets in much more detail than those with a longer horizon)
- A chance to build those targets into meaningful action plans
- A chance to construct financial statements to identify high- and low-profitability activities, and funding requirements (think cash-flow management)
- Develop financial statements to support your request for new or extended funding (loans, capital injections, overdraft facilities)
Build a budget based on your business plan:
A budget is a natural extension of the financial forecasts in your business plan.
- It will allow you to track your actual performance against your forecasts, and prompt you to refine your forecasts and action plans to bring things back in line.
- Importantly, a budget with a regular (monthly is best) review is an accountability tool – to prompt you to overcome delay, distraction and procrastination.
If you need help with:
- Understanding the basics of business finance
- Developing a business plan for future sustainability, growth and accessing funding
- Detailed budget creation, tracking and financial control
I provide tools, techniques and tutorials to help.