It’s fair to say that today’s business environment is a trial by fire.
Soaring interest rates have bored deep holes in consumers’ pockets, the skilled labour market is tighter than ever, and the world economy has experienced a whiplash turn of fortunes. We’re passed the post-covid boom. Businesses are being put through the wringer and the economy is twisting the knife.
You might feel like you can’t catch a break.
What if you could turn these threats into opportunities? You can transform a bad hand into your smoking gun with clever planning.
Financial literacy allows you to make informed decisions about your future operations.
Nothing holds a business back like a lack of funds. This is especially true for smaller businesses. If one large client fails to pay on time, you might be short on the cash flow you need to keep the lights on and the payroll flowing. Things can hit the fan quickly, and it’s a very slippery slope. Businesses can go from profitable to bankrupt in months because of avoidable mistakes.
Any one of the 7,158 companies that went into administration in the year to May 31 will tell you as much.
Financial literacy is the best way to stop this.
Take the time to understand your financial situation, wrangling in even the wiliest parts of your business. Categorise your recurring expenses. Map out your capital structure. Have an accounting book so clean it would make a lender blush. Once you’ve got watertight records, you can link your accounting to your strategy.
Which of your assets generates the strongest returns? Is it human capital that makes your business shine or equipment and resources?
Know what makes your business stand out and leverage those strengths for success. Ditch the rest if they don’t serve a purpose. It’s like a council pick-up for your business. This might require offloading assets that are gathering dust and reinvesting in the ones which generate cash flow. If your staff are your greatest asset, pay them well to retain them. If it’s your equipment, then keep up to date with maintenance. Know your balance sheet well and understand how each part contributes to the bottom line. Then prioritise additional capital based on the numbers.
Furthermore, you should proactively engage with the ATO and your lender about debt payments. With interest rates at decade highs, your ATO debt is something you’ll want to manage closely too. Uncollected, undisputed tax debt rose from $26.5 billion in mid-2019 to $44.8 billion as of June 30 last year.
The ATO is not the terrifying basilisk we imagine, but you must take it seriously. They can arrange payment plans and write down some of your debt if you talk to them. So communicate your situation and open the floodgates to solutions.
You should approach your other loan obligations the same way.
Take stock of your loans and assess your ability to repay them. Refinancing can be a great option if you fall behind on a teetering debt stack. Roll them into one repayment and chip away at it. If the repayments are too high for you to service, it might be time to see a restructuring expert.
When you control your accounting and keep everything lean, the money stuff is much less daunting.
Use innovation as a springboard for business success.
When faced with the unexpected, you need new ways of doing things. New approaches, new perspectives, new ideas. A crisis is the perfect time for innovation. Make your business sing with expanded service offerings and more personalised client support.
A lot of this can be done without much operational change.
For example, a financial planning business could flex its advisory muscle and release fortnightly economic updates for clients, giving insight into why conditions are changing and how you respond. If you’re in construction, it may be time to diversify into home improvements or DIY renovation advisory services.
Whatever your niche, the key is to think commercially and offer something inventive.
You might need to upskill, hire new people, or reinvent your workflows with new systems. Whatever it takes, you should attempt to find novel solutions to current solutions. Don’t fixate on the needs you want to exist for your customers. Respond to the realities of today.
Flogging a dead horse won’t get you anywhere. Think outside the box and plan around that new vision.
If your business is in a good cash flow position, use the time to invest in your capabilities. As interest rates rise, the return on your investment must be greater than the equivalent rate your money would earn in a bank account. This requires you to develop daring, brilliant, and incisive solutions to business expansion or diversification. Shift your energies. Find new ways of working which rewrite the rules entirely. Make every investment count, and you’ll supercharge your returns.
It would be remiss of us not to mention artificial intelligence here.
AI can streamline your workflows and increase the output of lean teams. For service businesses, ChatGPT or Google Bard can help overhaul your marketing operations. They can create EDMs, social media posts, and articles which save you hours. This boosts your manpower and helps you squeeze every ounce of productivity from your team. If you want to be more hands-on, they can suggest content ideas and help with your planning.
But it isn’t just marketing where AI can shine.
You can harness AI to build client pitch decks, scrape databases, and condense long research reports into short summaries. This gives you more brainpower to focus on higher-skill tasks—another win for overworked and overstressed business owners.
So don’t let stagnation calcify your business. Use the challenge as an opportunity to be better than your competitors and shine in a moment of darkness.
Retain and sharpen your talent pool.
A staggering 97.5% of all businesses in Australia are small businesses, employing nearly 5 million people. By industry, it is Australia’s biggest employer. But that doesn’t mean finding qualified, hardworking employees is easy. Attracting the right talent can be tricky in a tight labour market where wages are competitive, and job seekers have all the power.
So nurture your talent and make your teams shine.
The average workplace will have a mix of performance and potential. But we often look outside to boost productivity and give our businesses a lift. Don’t spend all your time on your high-performers or on trying to recruit new people.
Doing so means you might miss out on unrealised potential and performance in your current team. Encourage the unlikely stars in your business. The misfits, outsiders, and naysayers might have leadership potential you could never expect.
Leaders should look to unexpected places for opportunity and give their teams the resources they need to realise their full potential.
It is a trying time to be a small business in Australia.
You might feel like you’re going up against the world and that the economy is doing everything possible to make life difficult. And you know what, maybe that is the case.
But it shouldn’t stop you from working with these challenges and turning them into golden opportunities. Harness innovation, financial literacy, and the untapped potential of your teams, and you might find yourself stronger and more resilient than ever before.
Take that, economy!