Much noise is being made at the moment about the slowing of Economic Growth in Australia. In addition to this there are many issues that are impacting local and global confidence, including for example falling interest rates and the China/US trade war.
We are not economists and certainly not fortune tellers. We can’t predict with any certainty the state of the economy heading into the future. We are however accountants and business advisors and based on our extensive experience we do know that great businesses not only survive but also thrive regardless of the economic conditions around them.
Drawing on our experience we have identified what great businesses have in common. We’ve listed the 7 common attributes that successful businesses have a clear and documented understanding of:
- Business Vision - This has two aspects, the first being “why this business” – successful businesses can articulate what it is about the business that excites and motivates the people within it. The second aspect is, “what does the future hold for the business” – they clearly understand the future size, scale, operations, markets and customers.
- Who their customers are – They have a detailed knowledge and understanding of their customers (including different demographics, if applicable). This allows the business to better look after its existing customers and makes targeting new customers a lot easier.
- Value Proposition - The business knows what their customers value most from their products/services and have built a culture and internal systems to consistently deliver it.
- Business Financial Model - They understand how the finances of the business come together, what metrics drive the revenue and what corresponding costs are required to earn that revenue. Having a deep understanding of how the financial model comes together along with an ability and willingness to regularly forecast future results to set targets gives confidence for the future success of the business.
- Knowing the score - They consistently measure Key Performance Indicators and produce reports that allow relevant stakeholders to track the success of their value proposition and business vision.
- Who the right people are for their team and the best culture for those people to thrive – The ability to successfully execute day to day operations comes from within their team. They recognise an owner can only do so much and they have the ability to build a team of high performers to form a culture that aligns with the Business Vision and Value Proposition.
- Innovation and Adaptation – They embrace the saying, “if you always do what you’ve always done, you will always get what you’ve always gotten”. If the vision for the business is one that is much larger than the present, then innovation and adaption is made to achieve the desired growth. Further, in a world where change is occurring at an ever-increasing pace they prioritise their ability to stay ahead of curve.
Think about how your current business measures up against these attributes. Are the attributes present, and if they are present, do they reach sufficient levels of excellence?
To ensure that the above attributes are present in your business here are some helpful tactics:
- Maintain margins - Most businesses, when looking to maintain margins simply look to cut costs where they can. However, a better mindset for this process is instead to identify wasteful practices within the business and implement plans to eliminate said waste.
- Be ready for opportunities and take some risks - During times of uncertainty businesses can migrate towards safe options. Being bold, identifying opportunities and taking measured risks can lead to success as your competitors stay the course and don’t rock the boat.
- Diversification - Diversifying too far from core products/services/customers etc can threaten the focus and success of the business. However being too narrow can represent a large risk if something goes wrong. Identify opportunities within the scope of the Business Vision and Value Proposition to generate additional sources of revenue and profit.
- Crisis Planning - If and when something goes wrong stress levels increase exponentially. During these times the brain may not be working at its optimal capacity and as a result it will be limited to the number of ideas/solutions it can generate. Therefore, in a time of low stress do some planning. Anticipate potential crisis events within the business and the markets that it operates. Rank these in order of their likelihood of occurring and for those at the top of the list record some ideas and potential solutions. There is no need to develop full plans at this stage. If something does happen in the future, you can then develop an action plan to implement the potential solution identified earlier.
In summary, instead of focussing and worrying about the economic headwinds, turn your focus inward. Work on the attributes and tactics listed to fortify your business for long term success regardless of the economic conditions.
For assistance evaluating your business performance, determining and documenting strategies please contact your usual Mazars advisor or alternatively our Business Improvement specialists on:
Published: 20 January 2020
Please note that this publication is intended to provide a general summary and should not be relied upon as a substitute for personal advice. Content is accurate as at the date published.
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