The pandemic has been one of the most significant tests of resilience many businesses have ever faced. But one of the hard realities of business is that there are countless challenges which can test a business’ sustainability and resilience over time.
Economic volatility or recession, talent shortages, higher costs and increased competition can all threaten a business’ viability. The most successful and resilient businesses take proactive steps to anticipate and weather these shocks ahead of time.
So, what steps can your business take to become more resilient?
Take your financial governance to the next level
With sophisticated financial governance and insights, you can anticipate any financial issues coming down the track and arm yourself with the insights to avert any issues.
Financial reporting is particularly important. Make sure your chart of accounts is optimised, that you’re forecasting cash flow and revenue accurately, that you have a detailed understanding of the profitability of your business overall as well as the profit margin on each product or service, and that you have a comprehensive budget. These measures will help you identify and avoid any potential financial problems down the track.
For example, if your cash flow forecast reveals you’ll experience cash flow bottlenecks down the line, you can act now to ensure you will have enough cash reserves in advance. If your budget shows that rising costs are putting pressure on profitability you can take steps now to cut discretionary spending, renegotiate supplier contracts or reduce headcount as needed.
The reverse is also true – better financial governance and reporting will also ensure you don’t miss out on any opportunities to grow sustainably. For example, your financial insights will reveal which product lines are the most profitable and should be expanded or which markets hold the best opportunities.
Develop recurring revenue streams
If your cash flow forecast is often lumpy and has you constantly chasing your tail when it comes to finding enough cash to cover costs, building in some reliable and consistent income will be an enormous help. This is where building recurring revenue streams can be a great strategy.
The recurring revenue stream model involves the customer or client being billed at a predetermined interval (for example monthly), often at a fixed price, in return for regular and ongoing access to your products or services. This can take the form of subscriptions, membership programs, retainer contracts or freemium models.
By developing recurring revenue streams you will also benefit from a more streamlined sales process and lower cost per acquisition which is also more sustainable over the long-term.
Investigate pathways to source capital
Even if you aren’t currently in need of capital, having options up your sleeve for accessing credit or introducing liquidity will prove worthwhile should your circumstances change. This will safeguard your business against any cash flow challenges, ensure you have the capital needed for any important investments or help you pay down debt.
Options may include taking out a line of credit with the bank, sourcing venture capital, crowdfunding or building a cash reserve. Each option will take time to turn around, hence getting prepared in advance makes a lot of sense.
Refine your business strategy
If a business strategy is too rigid, it can quickly unravel even the most successful businesses once they’re subjected to unexpected uncertainty. The most successful and resilient businesses plan for the long-term, but ensure their business strategy remains flexible and adaptable.
Make sure you build in contingencies into your business plan and forecast different scenarios. Ensure your business strategy is closely aligned with your risk management plan. This will allow you to evolve and pivot quickly as needed.
Make sure your business plan also has a strong focus on sales, marketing and business development. Without this, not only will you be unable to generate new leads, you won’t be able to nurture existing customers and clients which can send your business backwards.
Optimise, outsource and automate
One of the best ways to build resilience into your business is to ensure that your processes are as efficient as possible. A good place to start is to identify what can be optimised, outsourced, automated or delegated. The goal here is to reduce labour costs through investment in technology or cheaper labour.
For example, you might be able to automate parts of your marketing, sales or reporting. You might also be able to outsource lower value work overseas or to more junior staff.
The best way to build resilience into your business is to never get complacent, even when times are good. By being aware of potential risks and mitigating them before they occur, your business has a much higher chance of surviving and thriving into the long-term.
“The opinions expressed by BizWitty Contributors are their own, not those of BizCover and should not be relied upon in place of appropriate professional advice. Please read our full disclaimer."
