Another year has come and (nearly) gone. What progress has your business made and what changes can you make in 2015 to take it to the next level?
A new year provides a great opportunity to wipe the slate clean, clear all those issues that have held you back and set the course for a truly prosperous new year.
One of the key things businesses can do is take “time out” from doing it, doing it, doing it and lift their focus from the day to day and take a higher level “helicopter” view of their business and where it is headed.
So, here are my top six tips for a happy new year.
1. Take the opportunity to future proof your business
“Future proofing” is all about anticipating the future, developing strategies to minimise shocks and capitalising on opportunities. Sounds a bit like planning doesn’t it? Of course that is exactly what it is. The problem is a lot of businesses don’t plan. Often this can be because they don’t know where to start, so this is where having a process (and an external facilitator) can help. I use a simple process – now, where, how. This requires thought about where the business is NOW, WHERE you want the business to be in the future and an action plan to work out HOW you’re going to get there.
2. Get your finances in order
Part of future proofing your business is ensuring you are in a sound financial position so that you can weather any business storms that come your way. If you don’t know where you are currently and where you’re heading, you’re flying blind. So make sure you know some key financial parameters for your business.
Here are three key areas I look at when assessing how a business is going. If you’re not regularly looking at these, then you should be.
* Know your return on capital employed (ROCE). Think of your business as a pot of money – your money. You need to ensure to make an appropriate return on your money.
* Know your free cash flow (FCF), or available cash. This will help you understand where the money has gone.
* Know your working capital requirements, particularly if your business is growing. It’s not use aiming to grow the business if you don’t know how much cash you’re going to need to fund that growth.
3. Focus on profitability, not turnover
Don’t chase sales just for the sake of it. Make sure you’re making money out of your sales. Turnover is vanity but profit is sanity.
4. Make sure you’re in the right company structure
What might have been appropriate years ago may not be appropriate now. Times change – tax laws change, asset protection laws change and your personal circumstances change. If you haven’t had your business structures reviewed in a while, get these looked at by a professional to ensure they still work for your current circumstances.
5. Consider your estate planning
We’ll all die sometime. Make sure your estate will go to who you think it will go to when you die. Many people don’t realise that a lot of our assets are not really “our” assets. Things like your jointly owned family home, your super and anything held in a family trust are most likely not “your” assets to leave, so be sure that you have thought things through. For most business owners, the bulk of their wealth is increasing held in super and the jointly owned family home, neither of which usually forms part of your estate so who will end up with these on your death?
6. Reduce waste in your business
If you don’t think you have waste in your business, try thinking about the waste in your home – wasted power, wasted water, wasted food, wasted money. Now try putting a dollar figure to this. Then do the same with your business. You’ll be amazed at how much waste you’ll find.
Grant Field is chairman of accountancy firm MGI and has more than 25 years of experience in advising family businesses.