Sustainability

There’s been a lot of talk recently about “sustainability” - in our environment, in our personal and working lives, and increasingly as a business management concept.  And many people will have different opinions about what business sustainability even means, in business terms (here’s an explanation from Investopedia that we like a lot).

 

At the same time, many businesses still focus simplistically on “growth”, and we’ve all seen plenty of cases where that has turned out to be unsustainable, and those businesses have either fallen back or even failed altogether.

Should Businesses Have to Choose Between Sustainability and Growth ?

Not at all.  Considering “environmental sustainability” alone, there are plenty of examples where fossil fuel businesses such as AGL are actively pivoting into renewable energy production, to both reduce their costs and maintain customer loyalty for the long term.  Retailers like K-Mart know that they have to improve the “social sustainability” of their supply chains, to satisfy increasingly aware and concerned consumers and even avoid legal sanctions.

And “Economic Sustainability” ?

At the Advisory Collective we believe that business opportunities and risks usually go hand in hand, and there is no point making a business bigger if it isn’t going to also thrive - or, at the very least, survive for the foreseeable future.  So if you wish to increase business sustainability while also growing, you will need a plan that balances what must be done across all Six Pillars to ensure that growth can be achieved and sustained, just like many athletes need to train for both strength and stamina, or sporting teams practice both offence and defence.

 

So here are our “Six Pillars of Sustainable Business Growth” - six highly practical strategies that will help your business to both grow AND become more economically sustainable:

Your Strategy - You Must Plan for Sustainable Risks

Businesses that grow for the medium to long term have great Strategic Plans and execute them well.  And even the best plans will often fail to anticipate material risks, so great business strategists schedule and resource for dynamic risk management at both the enterprise and operational levels of their business.

Your Customers - Sustainable Sales Growth Depends on Customer Loyalty AND Great Products

A lot of business owners and leaders are fixated on acquiring new customers, so they invest a lot of money in their brands and marketing communications, hiring New Business Managers, paying commissions etc.  But how many of us invest enough in simple customer retention ?

 

Trust us - if you are focused on driving new business, your existing customers will figure it out and they will be wondering what you are doing to look after them.  For example, are you discounting to win new business, but still charging higher prices to contracted customers ?  What will you say if they complain about that ?

 

And remember: your existing customers will already take your call, so it's often a lot more efficient to grow sales by increasing your “share of their wallet” than it is to attract a whole new customer.

 

Finally, you won’t win many new customers or keep the ones you already have, if you don’t have a good product innovation strategy to keep your goods or services competitive.

Your People - If They Can’t Sustain Their Jobs, They Won’t Sustain Your Business

Everyone is talking about “work / life balance” these days - even us.  Very few star employees - the ones who work hard AND smart, for years on end, and consistently “go above and beyond” - think they are doing themselves or their families any favours by working excessive hours, or enduring unbearable workplace stress.

 

We’ve all seen the mad panic that some leaders go into, trying to convince a key employee to reconsider resigning, or even blaming them for their own burnout.  Even if they do, they generally won’t stay beyond the short run.  So look after your best, most valuable people before they start burning out, and they will look after both you and your customers.

Your Finances - Even Profitable Business Can’t Sustain Negative Cashflow Forever

A lot of businesses can be profitable on paper, but the cash is tied up in excessive trade debtors or inventories, or going out to suppliers too quickly.  You need to understand and optimise your Working Capital Cycle as well as your business’s revenues, costs, margins and profitability.  And the better your working capital position, the more internal capacity you will have to fund your business growth investments.

Your Operations - You Shouldn’t Grow a Business that is Dependent on Unsustainable Supply Chains

There is zero point getting a cheap deal on terrific raw materials if that supplier isn’t going to be around when you need them to fulfill growing orders.  Are they losing money just to win your business ?  Are they breaking environmental, safety or even modern slavery laws ?

 

So use common sense when you are offered a supply deal that sounds too good to be true - no decent supplier will stop you doing due diligence on their business practices, and the best ones will actually welcome your questions.

 

Financial risk is only part of the supply chain story - struggling suppliers will often compromise on quality over time, and its very easy for a retailer, reseller or manufacturer to lose their own reputations when the illegal or unethical practices of their suppliers become known.

Your Structures - Will Your Business Relationships Sustain Growth ?

Many business partners eventually fall out over personal, financial or ethical differences - and they often don’t have an effective Partnership, Joint Venture or Shareholders Agreement.  And one of the most stressful times in any business partnership is when you are trying to grow a business but may have conflicting viewpoints on how to do that, or about the risks.

 

There is no point having a great business if you can’t work together as owners and leaders for the long haul.  So do the hard work early, to ensure that you are truly compatible as business partners, and document the legal protections that you will hopefully never need to call on.

 

Similarly, there is no point getting a cheap loan funding your growth plan if the lender doesn’t understand your business and may call it in at the slightest hint of trouble.  You are probably better off, on balance, borrowing at a fair price from someone who takes the time to learn about your business and its growth plans, with reasonably flexible terms. 

You Don’t Have to be a Hippie to Value Sustainability

At the Advisory Collective we absolutely agree that we all need clean air, pure water, healthy food, fair laws and safe workplaces and to mitigate climate change.  So we believe unequivocally in environmental and social sustainability.

We also say to those who may have different views on some of those issues that economic or business sustainability should sit at the very heart of every business, because those that manage it well will be more profitable, less risky and more valuable... which is good for all of us, wouldn’t you agree ?

Matt McDonald

About Matt McDonald

Matt has been a Chartered Accountant since 1991, a Chartered Secretary since 2004, holds a Bachelor Degree in Commerce and a Masters Degree in Legal Studies and is also a former Certified Internal Auditor.

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