Staying Afloat and Thriving through a Downturn

When the future looks uncertain, what can you do to prepare and strengthen your business?

Recent times have certainly shown us that the future path of your business can change in an instant – usually, due to influences that are far beyond our own control. The Covid-19 pandemic and the ongoing global economic recession have both had a negative economic impact on the business world – so, when a downturn strikes, you need to be ready.

The key is to be prepared, to have a ‘Plan B’ and to react in a proactive way to the uncertainty. But what elements of your business should you focus on to get your downturn plan ready?

How to keep your business from sinking

To keep your business afloat, you’ll need to be agile, innovative and resourceful. And being flexible in the face of adversity is also likely to play a big part in your survival

No business owner has all the answers, and there are some important steps to take if you’re going to overcome the challenges of a downturn and stop the business from sinking.

Proactive steps to take will include:

  • Enhancing your business knowledge – knowledge is power, and being in control of your business data gives you that knowledge. The latest cloud reporting tools, like Fathom and Futrli, help you to understand the financial numbers and forecast the future path of the business, allowing you to make truly informed decisions.
  • Improving your cashflow – during a downturn, money will be tight and your cashflow position is likely to be poor. To improve this, you need to be proactive about reducing overheads, billing promptly, following up on overdue invoices and making sure that the minimum amount of cash flows out of the business, and the maximum flows in.
  • Negotiate with your suppliers – if you can wrangle a better deal from your suppliers, that goes a long way to enhancing your cashflow position. Negotiate with your suppliers to agree on better terms, or cheaper prices, and talk to your landlord about a reduction in rent – or even a rent holiday if the situation is extremely dire.
  • Accessing additional funding – when your cash reserves get tight, there may be a need to look for additional funding. This could mean asking your bank manager for an extended overdraft, approaching business lenders for a loan, or even looking at attracting private investors or private equity firms that may want to pump money into the business – although you’ll need a strong business plan for investors to be willing.
  • Evaluating your market offering – to generate enough revenues to survive, you need your products and/or services to be selling. To that end, it’s worth evaluating your market offering and making some changes. Do some products deliver a much higher return than others? If so, you could make more money by focusing purely on these products and having a tighter and more profitable product range.
  • Evolving your marketing and sales – communication with your customers during a downturn is vital. Keep them in the loop and let them know that your products/services are still there for them. And reevaluate your marketing channels to make sure you’re hitting the right audience. Is your online presence as good as it could be? Are you providing enough information on your website and social channels to help solve your customers problem? If not, what else could you do to bring in more enquiries and sales.
  • Learning to pivot and diversify – some sectors may tank completely during a downturn – for example, the travel and hospitality sectors were badly hit by Covid. If this happens, you may need to pivot into a new niche or sector to find a new audience and more revenue streams. You can also diversify your product range to meet the needs of a wider range of customers, bringing in more revenue streams and bumping up your cash position as a business.

It’s all about having that Plan B in place. When (and if) a downturn hits, you’re then primed and ready to respond.

Talk to us about getting the specific business advice you need

The better prepared you are, and the faster you react, the more likely it is that you’ll ride out a downturn successfully. If you’re looking to improve your business planning, upgrade your disaster management plan, or improve your financial model, do come and talk to us.

Planning for Seasonal Dips in Income

Seasonal dips in income can be highly challenging when you’re a small business. But there are proactive ways to predict, plan for and overcome these dips in revenue.

The key to dealing with seasonal dips is to know when they’re most likely to occur, and to have measures in place to spread your income and revenue pipeline over the course of the year.

Understanding seasonality in your sector

If your business is seasonal such as pool supplies, or a ski gear specialist, you’ll be used to the peaks and troughs, but many ‘non-seasonal’ businesses experience times during the financial year where sales and revenue peak – and, on the flipside, where sales and revenue experience a pronounced dip.

When income is low at certain times of the year, it makes for challenging times.

So, what are the key ways to plan for this kind of seasonality?

  • Forecast your seasonality – it’s vital to know WHEN you’re most likely to experience any seasonal dips. Looking at benchmarking reports for your industry is one way to predict the seasonality in your niche or sector. But you can also use your own accounting data to great effect. Look back through your profit & loss reports and spot where the peaks and troughs have occurred over preceding years.
  • Charge a premium in peak time – one straightforward approach is to apply premium pricing for your products/services during the busy season. By increasing your pricing, you boost your overall revenue, giving you more working capital to see you through the leaner months when sales and income are at their lowest.
  • Offer additional peak-time services – offering added extras and other additional service lines during peak time is another way to maximise the season. In the months where customers are most engaged, look to upsell these premium services and offer more value. Satisfied clients will be more inclined to pay for added extras, giving you an increased revenue stream from the same number of customers.
  • Target other markets – exploring other related markets is another useful tactic. When you’re experiencing downtime, look for other ways to monetise your existing assets, products or services. For example, if you’re a hotel where sales peak in summertime, offer discounted conference space in the winter months to boost revenue.
  • Diversify your products/services – if one product/service has a known seasonal dip, look at adding an additional product or service to offset this downtime. For example, a a ski resort could promote bike-riding or hiking breaks during the warmer summer months to keep revenue constant. Likewise a pool maintenance firm could establish an outdoor fireplace business for the colder months.
  • Have a regional e-commerce strategy – If you’re dependent on a small local market, broadening your marketing and e-commerce strategies can help to attract a wider customer base – and bolster sales. Paid advertising through Facebook, LinkedIn or Twitter can easily target new geographical markets, bringing in new customers and giving your revenue a much-needed uplift during seasonal troughs.

Talk to us about planning for seasonality

If your business is struggling with seasonal dips, and the resulting impact on cashflow, come and talk to us. We’ll help you identify the timing of your seasonal downtime, and come up with a clear strategy for stabilising your income across the year.

Call us on (06) 878 8824 to discuss a plan for your seasonal dips.

Thinking of Buying a Business?

Things to Consider

Buying an existing business can be a great way to get started as a business owner, or to expand operations if you are already running a business successfully.

Established businesses have already done the hard work of setting up a business, so you can get up and running on day one without a lengthy formation process.

Things You’ll Need

  • Why is the business for sale? – It’s important to understand the motivation for the sale, whether strategic or whether an emergency sale. There may also be hidden reasons for the sale which your research can uncover.
  • Research – Do more than you think you need to! Market research, investigation, learning and questioning about the potential business, the locale, the industry, the customers, the suppliers, the competitors, the market and the nature of the goods or services being sold will ensure you don’t rush into a decision just because it looks like a good deal.
  • Due diligence – You’ll need to see detailed financial records, contracts, licenses, supplier agreements, lists of equipment, assets and inventory, lists of liabilities, loans and debts, and all employee records before making your decision.
  • A good business plan – That covers one year, two to three years and possibly five years as well. This will help you to look at the longer term and big picture, assess the potential of the business and give a realistic picture of what you are committing to.
  • Independent advice – from your tax agent and other business advisors such as an industry expert, business broker or lawyer. You might think a business looks like a great potential, but objective observers may pick up issues or queries that you have not.
  • Finance – Whether it’s your own funds, a business loan or short term finance options, you will need to work with your advisors and refer to the business plan to assess how much you will really need for the initial purchase, transition period, and future investment.
  • Commitment to the work – Being prepared for responsibility required to run a business. Running a business does require certain skills, as well as time, energy and money. You need to be clear about your reasons for going into business and to be sure you are up for the challenge!

When considering a business, we can help you to analyse the financial reports, activity statements, tax returns and sales and purchases records to give you an independent overview of the financial performance and potential of the business.

We can assist in understanding the financial performance and benchmarks of a business you are considering buying so that you make the best decision possible! Call us on (06) 878 8824 today.

The Obvious and Unexpected Benefits of having a Personal Budget

Having a personal budget is essential to gaining control of your personal finances.

Budgeting doesn’t necessarily mean restriction; it frees up your money, so you know exactly what’s available to spend.

The top 10 benefits of personal budgeting:

  1. Gives you control. Developing your personal budget gives you control over your money. You’ll know how much cash you’ll have coming in and can make a plan for how to spend it.
  2. Focuses you on your money goals. Everyone should have goals for their money. Whether this is paying off debt, increasing your savings, or freeing up more cash to invest in your business, a personal budget will keep you focused on achieving these goals.
  3. Creates awareness of where your money goes. Have you ever looked at your personal drawings from your business and thought ‘we can’t possibly have spent that much money last year!’? You’re not alone. So many people really have no idea what they spend their money on.
  4. Builds better money habits. Reviewing your actual results against your budget each month will encourage you to think about your spending before you spend.
  5. Helps manage debt levels. You’ll be able to plan for unexpected expenses instead of obtaining debt to pay for emergencies. You’ll also be able to allocate more money to debt repayments to become debt-free faster.
  6. Helps you achieve your wealth goals. Wealth goals are your long-term financial goals; saving for retirement or major life events. Because these are long-term, you need to start planning the steps to achieve your wealth goals now.
  7. Provides an early warning system. By regularly monitoring your spending, you’ll quickly identify upcoming costs and adjust your spending if required.
  8. Aids communication. Spending time developing your personal budget with your spouse will ensure you’re aligned with your spending plan.
  9. Provides you with more money. If you have a personal budget and stick to it, you’ll end up with more money at the end of the year than you would’ve had without a budget.
  10. Ultimately, it gives you a better life. Not only will you end up with more money, but you’ll also likely have less conflict and stress over money.

Personal budgeting doesn’t have to be a time-consuming process. Dedicating 1-2 hours a month to budgeting will result in a huge improvement; not only to your bank account but to your stress levels too.

“A budget is telling your money where to go instead of wondering where it went.” – Dave Ramsay

Dedicating 1-2 hours a month to budgeting will result in a huge improvement; not only to your bank account but to your stress levels too.

Contact us if you need help developing your personal budget – we have an easy to use template we can send you. Call us on (06) 878 8824.

Grow with the (Cash) Flow

Steady cash flow is the fuel that powers your business, but when you’re busy doing a million things at once it can easily slip to the bottom of the priority pile. Here are some tips to keep the cash flowing while you’re growing:

  • Invoice quickly – good debtor management is crucial, so send invoices quickly, ensure your payment terms are clearly outlined and offer discounts for prompt payment.
  • Make it easy – whether you offer mobile, online, credit card or modern POS payment options, make it simple for customers to pay you.
  • Take advantage of technology – ditch the paper and take advantage of cloud accounting.
  • Be one step ahead – use cash flow forecasting to outline your expected income and costs.

If cash flow is king, forecasting is queen – and making informed estimates doesn’t have to be confusing.

Give us a call (06) 878 8824 to chat through your objectives and we’ll help you develop a valuable, detailed and easy to digest profit and cash flow plan so you can confidently stay on track as you grow.

Sorted Money Week Tips

Sorted Money Week is aimed at empowering New Zealanders to manage their personal finances. In support of this initiative we share 3 Money Week Tips to help you improve your financial literacy and sort your finances.

TIP #1: Understand WHAT you are Spending

To get a good idea of what you are spending, you need to look at how you spend and where the money is going. Using an app can be useful to help track this, and can be enlightening as to some of those annual amounts you often forget to budget for.

See here for some great tips and apps. Once you have a handle on WHAT you are spending, it makes it easier to look for ways to curb unnecessary expenditure.

TIP #2: Plan for a Rainy Day

Do you have an emergency fund? How well can your bank balance recover from urgent car repairs, medical bills, unexpected trips away? Read here for 10 reasons why you need to sort this now.

By saving just $5 a week (the cost of a coffee), within a year you’ll have $260 tucked away!

TIP #3: Sort your KiwiSaver

JP Morgan states by the time you are 40, a couple should have amassed 2.6 times their annual income in retirement savings! You don’t have to make huge changes to have a real impact on how well you are positioned for your older years.

For those in KiwiSaver, most people don’t understand how their fund works, or have looked to see if it suits them. The KiwiSaver Fund Finder is a nifty tool to help you look for a scheme that is right for your risk profile and age. The fund your mate uses, or the default scheme, possibly isn’t YOUR best option. Choosing the wrong scheme may cost you tens of thousands.

Speak to a financial advisor who can help you make the best decision for you or guide you on other investment options.

If you’d like to chat further about tracking your spending, saving for a rainy day or finding a financial advisor, give us a call on (06) 878 8824.