The start of a new year is typically a time when thoughts turn to the 12 months ahead. What are our goals? What do we want to change?
It’s also an opportunity to reflect on the year just gone –what have we achieved, and what has been holding us back from the success we’re seeking?
While 1 January is when this is most likely to happen, for business people the start of a new financial year also offers the ideal time to think about your ‘New Year’s resolutions’.
So – without trying to be too prescriptive (after all – these have to be your resolutions), I’d like to volunteer a few suggestions.
Revisit your business plan
We’ve all got one, but when did you last look at yours, or update it?
Many business plans get written for a specific reason – often to back up an application for a business bank account, overdraft, or business loan. Once they have served their purpose, they are filed away, or gather dust in a corner of the office.
For many Australian SMEs, this is a lost opportunity: a well-crafted business plan is a key tool for all businesses. Whether or not a business is growing or undergoing difficult times – all business owners should plan for both.
Some of the key elements that should be included in a business plan are: information about your product or services, the ‘unique selling point’ (USP); your market; competition; growth opportunities; your business finances; and your future plans.
A good business plan will include a set of targets for key metrics, based on real figures and projections of what you think you can achieve. Even if you only wrote it to impress the bank manager, that is a useful document.
Business plans are not carved in stone, and should be adapted as your business grows and evolves. So take the time to dust yours off and see if it still reflects your current situation and future aspirations.
Look on it as a living document at the heart of your business strategy.
Look at how your business is funded
Set aside some time to review your business’s funding and finance arrangements.
Start with a general review of the business operations. Sitting down and delving into the numbers is always a good practice and will help you spot whether margins are sliding or increasing due to economies of scale, for example.
Even when a business is technically profitable, cash flow can be negative if customers take longer to pay their invoices and suppliers demand their payments sooner. Try to forecast your cash flow needs, weekly, monthly and quarterly and ensure there is ample cover in the company account. Remember, cash is king!
Consider your financing options. Business owners will usually think carefully about a new financing option if it is a planned one-off, but when it is part of an organic growth process they tend to go with what is easily available. If expensive options are chosen, the costs can add up. Working out the real cost of business financing options can be tricky because you are not always comparing like-for-like.
Reviewing your finances as well as your operations on a regular basis is a valuable exercise for any business owner. It will help you spot potential cash flow problems as well as identify areas where costs are escalating and money is being diverted from your bottom line, and ultimately help to ensure your business continues to power forward.
Give some thought to succession planning
Whether you are five years or 15 years into your journey as a business owner, you should consider how you will eventually exit the business.
This may involve selling, passing it on to a family member or employee; it may be triggered by your retirement or simply a desire to move onto a new venture.
Regardless of the reason, having a succession plan in place will help you to smoothly transition out of your business when the time is right.
The other important element to this is that being a business owner comes with responsibilities. Part of this is thinking what would happen if you were to die, no matter how confronting that is.
Having a long-term succession plan for your exit from the business – no matter how it occurs – will one day prove invaluable. A new financial year is the ideal time to take some advice, and develop a succession plan for your business.
Over to you
Taking some time to set New Year’s resolutions for your business can pay off in the months ahead.
What are yours going to be?
Angus Sedgwick is the CEO of The Invoice Market, a funding and cash flow provider to Australian small and medium enterprises.