Although there has been considerable uncertainty over the past year, some business owners have found the capacity for reflection and planning. With some demonstrating incredible leadership by adopting a positive mindset and exploring alternative ways to emerge from the pandemic in a stronger position, with a more resilient and sustainable business. Rather than getting stuck in a rut with working capital cycle, these forward-thinking business owners have developed a bespoke financial model, which they can use to maximise opportunities and plot the path to recovery.
KEEP AN OPEN MIND
Be prepared to re-assess every aspect of the business from its products and services, to how it operates, its supply base and its customers. Most businesses will have a sales pipeline, but how might this change in the future? What will demand look like? Business owners should consider what they have learned during the pandemic and be prepared to do things differently.
HAVE A PLAN
With the end of business support measures in sight, business owners should plan at least 12 or 24 months ahead. This should include financially modelling their business to assess the impact of high-risk moments when the furlough scheme ends, loan repayments or deferred VAT fall due and working capital is required to fund an increase in business activity.
INVEST IN TECHNOLOGY
As businesses emerge from the pandemic, there are likely to be growth opportunities. By investing in technology, businesses will be better equipped to create business efficiency, value and take the right business decisions.
CREATE A BESPOKE FINANCIAL MODEL
To facilitate longer-term planning, business owners should create a bespoke financial model, which includes an integrated profit and loss, cash flow and balance sheet. This model will enable them to challenge assumptions and react to shifting market conditions as recovery gets underway. If there are problems with the vaccine rollout, for example, businesses will be able to adjust their financial model to see how this might impact business performance.
LEAD THE WAY
As they plan for the future, business owners should aim to inspire employees and strengthen customer and supplier relationships. Nurturing an entrepreneurial mindset while creating a culture that rewards positive behaviours could become an important differentiator in the future. This approach could help to attract and retain talented people at the same time as improving business resilience.
PLAY TO YOUR STRENGTHS
Small and medium-sized businesses are more agile than larger organisations to react to market changes and adjust their business models accordingly. When planning for the future, business owners should ensure agility remains a core strategic attribute.
DON’T LOSE SIGHT OF SHORT-TERM RISKS
When planning for the medium to long term, it is important not to lose sight of short-term cash considerations. Maintaining a short-term focus is vital to protect cashflow in challenging trading conditions.