Oops COVID - you also blew up the global economy.
The pandemic is, for the most part, over so now we look to the recovery phase. But unfortunately, COVID not only made the world sick. It
also blew up the global economy - kind of like Wile E Coyote and all of his unsuspected consequences while attempting to catch the Road
Runner. We are now dealing with staff shortages, supply chain delays, failure to return to work in the CBD and the big one, inflation.
There is a lot of discussion in the media about worldwide rising rates of inflation and how governments are trying to curb this. Across the
board, central banks are increasing interest rates. This is turn could lead to a global recession. So rather than sunshine and lollipops
after the end of the pandemic, we have doom and gloom. But it’s not all bad news. Australia could still be immune from another GFC. We have
done it before.
Managing the balancing act of inflation and recession is way above my pay grade. But, as advisors, we need to be aware of all the facts so
we can support our clients through this continuing difficult period. So, the big question is what can clients do to protect their
livelihoods when the economy is constantly changing around them?
Well, my number one top tip for business owners is
- Don’t stick your head in the sand
Many business owners try to ignore the warning signs when things are changing. If it’s too hard, pretending it isn’t, won’t make the worry
disappear. You first port of call should be to your trusted business advisor to ask “what should I focus on” and “what can I change”? Let
them advise you on what levers to adjust and dials to twirl to keep your business plane flying. Share the load and make plans for the
Even if you don’t have an advisor, the second golden rule is
- Keep all your bookkeeping up to date
If you aren’t on top of the data, how do you know when the business is struggling? Don’t wait until month end or end of quarter. When times
are tough, you want accurate, up to date data always so you can make assessments on your progress today. It’s important and the sooner you
are up to date, the better.
Following on from that is analysing the accurate data to improve your financial position. If you are flying solo and analysis makes you feel
overwhelmed, here is tip number 3
- Choose one thing to focus on
My suggestion would be to focus on something like your Gross profit margin. That one KPI tells you so much about how your business is
travelling. Below is the ATO resource that allows you to search for small business benchmarks.
You can check the Gross Profit margin that is suggested for your industry and find where you sit against the benchmark. Then track that
number every week and look for trends. If you spot changes for your business, ask yourself are they caused by increasing costs or a drop in
revenue? Once you understand the cause, you can make immediate adjustments to your prices or look for cheaper suppliers. Either way, you
are making positive changes today.
So, the bottom line is don’t be afraid of the future, just be prepared. A constantly changing world doesn’t have to be overwhelming. It can
be an opportunity for growth. You just might need that special key to unlock it.