The beginning of a new financial year is an exciting time. New opportunities abound, and the feeling of starting off with a clean slate can be refreshing, even in challenging times like 2020.
But as always, each financial year presents both the potential for great success and for great failure. If you want to push your business forward this year, you’ll need to ensure that you’re all warmed up, just like an athlete.
In this guide we’re going to go through five tips to help you get your business in tip-top shape for the financial year ahead.
1. Rethink Your Debt
Depending on where you are in your business’s trajectory, you may find yourself with a significant amount of debt, possibly from multiple creditors — especially if your business is fairly new and you’re still paying off your initial business loans or, worse still, high interest credit card debt..
The start of the financial year is a great time to look into consolidating or refinancing debt. If you consolidate your debt, you may have more bargaining power to get the best terms from a single lender. Then, you make monthly payments on the new, single loan which will be easier for you to monitor. However, debt consolidation isn’t always the right move, and it can leave you paying more than you otherwise would have. If you’re considering consolidating your debt, you’ll likely want to speak with a financial planner to see if it’s right for your business.
In any case, if your business is sound it is currently very cheap to borrow, and there is plenty of liquidity in Australian lending markets at present, with reduced mortgage lending.
2. Revisit Your Products and Pricing
Markets change quickly, and that means the product lineup and pricing you set last year may not make sense for the coming year. Take some time to evaluate whether there are any underperformers you could cut out of your lineup or “minimum viable product” prototypes that might be ready for a launch in the coming months.
Of course, you’ll also want to make sure your prices are still competitive in the new market landscape and adjust them accordingly – so don’t forget your competitor analysis.
3. Refresh your Strategic Plan
It’s easy to get carried away setting lofty goals and resolutions like “disrupting the industry” or becoming the number one provider in your space. However, these sorts of vague goals aren’t helpful, and can actually hinder your progress.
If you want to see more success in the coming year, recheck your Purpose (why your business exists) and your Values (how you and your people will behave) and set SMART Goals: goals that are specific, measurable, attainable, realistic, and time-bound (what your business needs to achieve).
For example, saying that you want to improve your sales performance this year could mean anything from getting one more sale to ten million more sales compared to the last year. A better goal would be to sell X number units by the end of Q2. This objective is clear enough that you can track your progress in concrete terms as the year progresses — just make sure your short term target is reasonable for your business, and aligned to your medium to long term strategy.
Here is our simple guide to what you need to include in your Strategic Plan – it doesn’t need to be rocket science.
4. Finish Your Budget – and Implement Cash Flow Forecasts
Its ok if you haven’t finished your Budget on the first day of the new financial year, but if you decide to have one don’t wait much longer. And don’t worry if the assumptions aren’t 100% right, that’s the inherent risk with every budget. Instead, use your Forecasts to progressively refine those assumptions over time, and make sure that you are forecasting both profitability and cash flow.
Remember, cash flow problems can be a death sentence for any business, even if it’s operating well in every other way, and even more so in tough economic times.
Essentially, a cash flow forecast is an estimate of how much cash is coming in and out of your business during a set period of time, typically a year, broken down into periods that align to how your business operates and reports its results (eg weeks or months). By preparing a cash flow forecast, you’ll be better able to predict periods where you may be experiencing a surplus or a deficit and plan accordingly.
It can also make it easier to see the monetary impacts of significant investment decisions you may be considering, such as hiring a new employee, purchasing a new piece of equipment, or renting a bigger office space.
5. Conduct a Business Review
Overall, the best way to ensure you’ve covered all your bases is to conduct a comprehensive business review around the start of the financial year, perhaps before refreshing your Strategic Plan, and particularly if it’s been a couple years since you last scheduled one. Doing so can help you discover new growth opportunities and identify looming problems before they get out of hand.
A business review is a thorough examination of your business by an expert that can help business owners break out of their habits and see things from an outside perspective. Getting a second set of eyes on everything from your business’s finances to marketing strategy can help you see things in a new light and take actionable steps to move forward.
These five steps will point you in the right direction for this coming year. As always, if you have any questions or need help getting your business in shape, don’t hesitate to contact us — we’re always happy to chat !