Governments come and governments go, almost as often as we change Prime Minister, but how does a business cope, grow and prosper, despite the constant changes?
Ultimately, at the broader level, changes to who is Prime Minister (Rudd to Gillard or Abbott to Turnbull to Morrison) only have an extremely limited impact on business and the broader economy. However changes in Government (from Liberal to Labor) can have an extremely large impact, chiefly to key sectors of the economy, including small-to-medium business. A NSW State election needs to be held by March 2019 (in seven months time !) and a federal election by May 2019 (nine months time !)
But what can small-to-medium sized businesses do when faced with these constant and relentless changes ?
Our first tip is keep your eyes on the main game, which is ensuring your business remains profitable. Remember its profit that counts or as a friendly CEO of a large manufacturing business always tells me “revenue growth is vanity, profit growth is sanity”. What he means by this is that many rapidly expanding businesses with increasing sales have gone out of business because the business owner let costs expand even quicker. Remember without increasing profits and cash flow, you are, in the long run, on the road to nowhere. Keep a watchful eye on profits and cash flow !
Secondly, right size your team. Now is the time to ensure you have the right staff with the right skills that are the right cultural fit. The economy and industrial laws are changing and you do not want to be on the wrong side if times turn even tougher. As the Boy Scouts say “Be Prepared”. When economic conditions are benign and business is good, we all become slightly lax regarding our staffing and let things run that really should be put right. Now is the time to sort out staffing !
Finally, don’t forget debt must always be repaid. Never forget whether it is trade creditors or bank loans, it eventually must be repaid in full. Always ensure you are not spending cash flow to expand the business that you need to pay creditors. Your business reputation is a highly valuable asset, protect it, that’s why you receive those 30 to 90 day terms from suppliers and loans from banks. In the 1990s official interest rates hit 17.5% and are now at record lows of 1.5%. The next move in interest rates is likely to be up, according to the Governor of the Reserve Bank. If interest rates start going up they may normalise, eventually, around the long term average of 4.5%. Don’t get complacent about your business bank loans, review the terms and start reducing that debt if you think it is to high !
Important Note: These articles have been prepared for general circulation and are circulated for general informational purposes only; these articles should not be regarded as business or investment advice. The articles represent the views of the writers and are subject to change without notice. Additionally, while every care has been taken in the preparation of the articles no representation or warranty as to accuracy or completeness of any statement is given. An individual or organisation should, before any business or investment decision is made, consider the appropriateness of the information in this document, and seek professional advice, having regard to objectives, situation and needs. This document is solely for the use of the party to whom it is provided.