If Donald Trump’s improbable victory, the EU referendum and the recent general election has taught us anything (other than the ineffectiveness of prediction polls) it’s that things are ever changing. On 9 June, many woke to the feeling of despair at the news of a hung parliament. This, combined with the start of the formal Brexit negotiations, will create a challenging and uncertain landscape for many businesses.
However, it is proven that UK businesses are resilient and there will be strength amidst the uncertainty. While clarity on Brexit negotiations, Britain’s future trade agreements and the access to European markets is not expected any time soon, one thing is for sure, these businesses will continue to trade regardless.
Here are some tips for ensuring your business is a resilient one:
1. Having a clear strategy
Do you have a clear strategy? Has it been communicated to the rest of your team? How are you measuring the success of the strategy? Do you have financial targets? Are you meeting those targets? What are the risks facing your business? Are you managing those risks? Have you thought about succession planning?
By answering these questions you can identify simple changes in each of these areas that can make a huge difference within a business. The introduction of regular team meetings, setting budgets, simple monthly management reports and discussing strategic plans with your adviser will help you achieve your long term goals and secure the future of your business.
2. Use the support available to you
Support can come in many different forms. It may be that you need some specialist advice. The recent changes in the business tax environment, namely the increase in the dividend tax rate and the increased scope of profits subject to dividend tax, means that the business structure that was right for you 12 months ago is not necessarily fit for purpose now.
Perhaps you need some financial support for growth plans, are there grants available? Can the business afford to take on some new debt? With interest rates remaining low, financial support from your bank is much more affordable than it was in times gone by.
Maybe you need some management support to leave you to focus on strategic plans rather than the day to day business operations. Is there a training need? Do your existing employees have the skills to take on some of your work load? Is there motivation for them to do so? There are a number of ways to incentivise staff, particularly key employees, to retain them in the business for the longer term.
3. Monitoring working capital
Proper working capital management is a critical step for ensuring that you maintain sufficient cash resources for your daily business operations. Whilst long-term strategic planning is also key to future success, the process of managing your working capital deals with daily operations.
Credit control – setting credit limits for customers will reduce your exposure to bad debt risk. Ensure overdue debts and disputes are chased and resolved in an effective and timely manner
Monitoring – those businesses who wait until their year end statutory accounts are prepared to establish the profits they have made in the year are those businesses that will be most vulnerable. It is essential that profits and cashflow are monitored continuously throughout the year. In an ideal scenario, monthly management accounts will be monitored and compared against a monthly budget. Any under-performance or issues can be identified and addressed quickly and steps can be taken to rectify these
Stock levels – controlling stock effectively has a significant positive impact. Focus on overall stock levels and don’t tie your cash up in sitting with unnecessarily high stock levels. Properly plan and manage stock levels to accommodate peaks and troughs in demand
4. Contingency plans
In such uncertain times it is essential to have a ‘Plan B’. In fact, you never known when you may need a ‘Plan C’ or even a ‘Plan D’. The more contingency plans you have, the better! Good business management means planning for when things go wrong, as well as when things go right. By identifying possible risks to your business and using them to make a contingency plan, you can ensure your business continues to survive, and thrive, after a crisis.
What you should remember is that with change comes opportunity and that could mean now is the time to start thinking about your longer-term goals and succession planning. A resilient business is not just a secure future for you, it could also make an attractive acquisition to someone. The availability of cashflow lending and attractive interest rates provides a more affordable landscape for management buy-outs and we are currently seeing an increased number of these in the market place.
There are also still a large number of private equity and cash-rich corporate buyers active in the market. With sterling likely to remain relatively weak for some time, the capital cost of UK assets will remain attractive to overseas investors. Those owners thinking of selling should not be put off by recent events as more than enough buyers are willing to discount these as a bit of local political difficulty and where corporate buyers may have a number of synergies, they are still willing to pay a premium for good quality, resilient businesses.
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