As government takes steps to redress past failures and puts in place reform programmes to re-build the economy, business owners should also be carefully planning how they play their part in building their businesses and boosting economic growth.
Jeremy Lang, regional general manager at Business Partners Limited, believes that uncertain times call for even more planning, not less. “Having the attitude of ‘what’s the point of drawing up a plan for the year in tumultuous times when everything might change anyway’ is very short-sighted. Good planners tend to see things coming well in time and clears up a lot about what seems uncertain about the future.” A good plan provides a solid base from which to move and business owners who plan tend to know how fast, how much, and in which direction to move when change comes suddenly. Lang offers the following structure for a good year-planning exercise:
Start by reflecting on the past year. Do an in-depth analysis of the previous year’s budget and look at where you went off budget. Was it a once-off event, or should your budgets be adjusted accordingly? If required, put corrective measures in place.
It is much more than a simple financial exercise, says Lang. Also reflect on your clients. What made them happy or unhappy? Do the same for your suppliers, partners and stakeholders. Are you still getting good value? Are alternatives available?
Look around you
No business operates in isolation. Changes on the other side of the world can profoundly affect your business. That is why it is good to have a sense of what is happening in the world, on the continent, in the country as a whole, as well as in your town and your specific industry. The IMF predicts a growth rate of 3.6% globally and 1.4% for South Africa in 2019. Now try to get a sense of what the growth outlook is for your industry. Also, what is the outlook for the exchange rate in the year ahead, the fuel price, the inflation rate, electricity prices and load shedding, climatic conditions and any upcoming changes in our regulatory environment such as the implementation of the new minimum wage? Try to gauge the impact of each of these factors has on your region, industry and business.
Now look forward with a budget for the year
You will need a detailed budget stretching out a year ahead. A good budgeting process goes beyond mere income, expenditure and profit. If you run a debtors book, profit does not necessarily equate to available cash in your business. There is a cash lag before your debtors pay you, which may become difficult to bridge when your business is growing. You need to budget for your cash flow as well, and make sure you include cash for capital expenditure and maintenance, both of which will be off your radar if you only work with a profit-and-loss projection.
Project at least a year ahead to ensure that you have adequate liquidity reserves. If not, put facilities in place early enough to ensure that you are not cash strapped at any point during the year.
Look at your efficiency and controls
Revisit your operations to see if there are different ways of doings things that can speed up your processes and cut costs. What about new technology to improve your efficiency? Where are the bottlenecks and wastage in your business?
Look at expanding your market
Two important questions have to be asked as part of any year-plan for a business. First, how can I expand my market beyond my existing clients, in other words, who else can I sell my existing products to? If you have been limited to one region, the time may be right to expand to an adjacent one, or if you’ve been servicing business clients, for example, you may be ready to develop a domestic offer.
And second, what additional products can I sell to my existing clients? There might be a complementary, value-adding product or service that you can add to your existing offering.
Look at your business from the outside
Business owners are so busy in the day-to-day running of their enterprises that they run the risk of not seeing important aspects or of missing the bigger picture. The best way around this is to invite a friendly expert to have a look at what you are doing. It may be a retired entrepreneur, an industry consultant or even a senior, wise accountant. Start with your industry association or consider the technical assistance programme at Business Partners Limited if you are looking for specialist advisors. Be prepared to pay for this kind of exercise. It is almost always definitely worth the money.
Look at your competitors
Do a thorough scan of your competitors to see how to remain ahead or on par with them. While you are at it, make sure to look at the threats and opportunities that technological advances and innovations pose to your entire industry – such as the danger of Amazon and other online retailing giants for traditional retailers. No industry will be left untouched by automation and artificial intelligence. Start planning now on how to remain relevant in future.
Plan to innovate
Innovation, the dynamo of business, is far from limited to only information technology or new products. It also applies to new ways of making old things, fresh ways of marketing and different business models. At the very least, an innovative year ahead will be interesting and exciting, with a much-improved likelihood of success.
Latest posts by Jeremy Lang (see all)
- Should you reinvest your business profits, or save them elsewhere? - 10th September 2019
- Tackling the business year ahead with a solid plan - 26th February 2019