With interest rates rising, energy prices increasing, and the well-publicised difficulty in recruiting and retaining staff, many business owners and CEOs feel alone and/or outside their comfort zone.
We are currently experiencing unsettled times. According to some forecasters, the Australian economy faces a 40% chance of a recession over the coming 12 months, and they predict a 90% chance of the U.S. entering a recession.
One of the business mistakes that CEOs and business owners make in uncertain times is making decisions too late. From our experience, making decisions too late transpires because many business owners do not have a plan in uncertain times such as a pending recession. Business owners tend to implement the same policies and not adapt to change quickly enough. They wait for things to happen before making decisions and establishing strategies for the future.
This lack of decision-making negatively affects business owners’ and CEOs’ well-being and health. The Gallup Well-Being Index highlights that 45% of entrepreneurs feel lonely compared to 42% of other workers and 50% of CEOs.
As a starting point, we suggest that;
- You review your company’s ‘mission statement’. That is, what is your service offering? Who are your key clients?
- Assess how well you are delivering your service offering.
- Brainstorm your company’s strengths, weaknesses, opportunities, and threats with key team members. Be honest with your weaknesses and threats. Most entrepreneurs have no problems assessing and articulating their company’s strengths and opportunities. However, during times of change, such as rising interest rates and energy prices and the possibility of entering a recession, we need to allocate more time to assessing our potential business threats and company weaknesses.
- Speak to your accountant. Your financials, particularly your Profit and Loss or Income Statement, Balance Sheet, and Cash Flow Summary, tell a story. I tell my clients that the numbers in these three reports tell me a story like reading a book. The figures will highlight your strength and weakness. Your figures and financial performance ratios can be compared to similar businesses in your industry.
- Review your cash flow projections. For example, what would happen to your business if your expenses increased by 10% and/or your business sales volume decreased by 10%?
- Finally, if you feel your business needs additional finance in the future, we strongly recommend you seek finance from your bank before you need it. The Banks do not like lending to businesses in a financial predicament. They are concerned with the ability of the business to service the debt in the future.
At the very least, if you take time to undertake the above six steps, I am sure from my experience, your stress levels will start to subside, and you will have a clearer vision of the business areas you need to focus on in 2023.
Should you need assistance in assessing the financial position of your business, please feel free to contact Peter Quinn by submitting an enquiry or calling us on +61 2 9580 9166 to book an obligation-free appointment.
The information in this document does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. It is important that your personal circumstances are taken into account before making any financial decision and it is recommended that you seek assistance from your financial adviser.