Creating a more robust business – part 2

Now you might be thinking, recession, what recession? The one you’ll need some recession avoidance activities in place to get through. The one that is very likely coming. 

Whilst Australian retail spending might be up at the moment, what with Black Friday and Christmas and business spending is up due to significant increased costs, we’re starting to see signs, internationally at least, that global companies are starting to trim their staffing levels to drop costs (and no, not just at Twitter, in case you were wondering). 

And as we discussed a few posts ago, rising inflation and unemployment are often triggers for low economic growth. And when economic growth ceases, voila, recession.

Last blog post looked at what specific types of businesses such as online, professional services or hospitality might do in order to be better prepared for a recession, should it hit. 

Today though, we’re keeping it more general and looking at what all businesses, regardless of focus, can do in terms of undertaking recession avoidance activities that will see them through what is likely coming our way. And, if by chance, Australia manages to miss a recession or it’s not too deep, in much the same way we made it through the GFC relatively unscathed as a nation, these actions can only benefit your business for the longer term. 

Recession avoidance activities 

1. What gets measured gets done. 

Have you ever really sat down and really looked at; 

  • who your best customers are
  • how they came to be working with you/buying from you
  • what they buy and how often? 
  • if there’s someone who refers business to you more often than others? Or 
  • if you have a couple of staff members that sell or produce work better than the others? 

If you want more business or more efficient/effective business processes, it pays to spend a bit of time investigating the statistics within your business. Once you’ve figured out the real strengths and opportunities that exist within your business that you can take better advantage of (or where some of the weaknesses reside), you can take action to maintain or improve on them. 

2. Review all your costs. 

If your’s is one of the many businesses that is a little quieter during January, it’s a great time to do this exercise. Review your costs, yes, everything and eliminate any spending that doesn’t contribute to ROI. Look at your recurring costs (even those that crop up yearly) as these often just become something you pay for without really considering or questioning them. Start with your credit card statement and direct debits on your bank statement. Ask yourself, how often to you really use whatever it is. 

Could you survive without it? 

  • Yes – If the answer is yes, ditch it and now’s as good a time as ever. Make a list and knock off one or two a day. 
  • Maybe – If your answer is a maybe, see if there’s a way you can pause the service/product for a while and see if you really miss/can’t really do without whatever the service/product is. Check and see if you’re getting a cheaper price by maintaining an ongoing service, or if you can restart at any time for the same cost. If you can restart (and you don’t lose your important records or data in the process), think about ditching it and coming back/restarting only when/if you really need it.
  • No – if you really can’t survive without it, it’s always worthwhile having a conversation about pricing. A friend of mine loves her book summaries. She was just charged a renewal fee. When she said she was thinking of leaving, they automatically dropped her yearly fee by 50%. 

3. Look for better deals on financing. 

It’s not just home loans that should be managed to save your precious hard-earned. If you’ve got financing on any part of your business, aim to review your rates and shop around for a better deal at least once a year. A client called me the other day to let me know that she called her bank and asked for a rate decrease to match something she’d seen and they agreed almost instantly. Ask nicely of course, but ask nevertheless.

4. Pay down your expensive debt 

Just because you can tax deduct business related debt, doesn’t mean carrying that debt is the best use of your business’ funds – especially expensive debt such as credit card interest (which usually hovers between 13-20+%). If you’re really cash-strapped, you might want to get some advice on whether you can consolidate that debt to an instrument/account with a lower interest rate.  A dollar saved, is as good, if not better as a dollar earned.

5. Review your insurance premiums 

Just like reviewing your financing, wherever possible review your insurance. It’s one of those things that the bill arrives and it gets paid without too much review. This might include public liability, stock, transit, contents, or even workers comp if your staff complement drops. If you’re facing tough times and/or business has reduced, see if you can renegotiate your premiums. And in doing a review, you might just find that the insurance cover that you thought you had, wasn’t the right one for your circumstances any longer. 

So, there you go, five relatively easy things that all business owners should consider doing at least once a year, but even more so as recession avoidance activities. 

In one of the next posts, we’ll cover building up a financial emergency buffer because, after all, forewarned is forearmed against economic shocks – however they come about.

Of course, if we can help you better manage your business planning or your business/personal tax affairs, you can call us on 6023 1700 or connect with us via Facebook or LinkedIn.

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If you've got financial or business questions, or you just want to run something by us, we'd be delighted to really talk to you – in person, over the phone - call us on 02 6023 1700 - or you can use the form below and we'll get back to you.

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About us:

Lloyd Accounting is a boutique accounting firm based in North Albury that operates with the sole purpose of making your tax and business affairs as easy as possible. For us, it's about really understanding what it is you're wanting to achieve and then using our experience and expertise to help facilitate that.

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Lloyd Accounting is now located at 932 Waugh Rd, North Albury, NSW.

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