30 July 2020

Why business planning has never been so important

As businesses across the country start to ramp up again, the future remains uncertain. Good strategic planning will help ensure that as many companies as possible learn from lockdown has meant to their business and get into the best possible shape going forward. Lee Meredith explains why business planning has never been more important.  

A windy spell

I had a conversation with a client recently, who provide short term hire equipment to companies within the construction industry. Depending on the weather, particularly on windy days, certain equipment cannot be used, and therefore does not generate income for the business. For many companies, the coronavirus pandemic has been like a four-month windy spell. My client has had to diversify, so, for instance, they would review their equipment and labour force and look to see what other services they can offer with their current resources, which sometimes falls quite widely outside of their existing industry. Basically, it’s a question of what you’ve got in place at the moment that will allow you to make more money and keep the business engine ticking over. With diversification, it’s important to think about what you’re diversifying into. Will it interfere with your current work? Can you turn the tap off again, quickly, if you need to? Ideally you would look to match the peaks of your diversified strategy to fill in the troughs of your existing business operations. Ultimately, good business planning will help make sure you remain flexible where you can be, but also making choices for the continued success of the business in times of uncertainty.  

A reimagined business model

The way things are going, there is a feeling that businesses, as they scale back up, need to rethink the way they work and protect themselves as much as possible in the event of a second spike and another lockdown. Of course, we must look to the future but our new reality is that we must simultaneously be prepared for reverting back to where we’ve been over the last few months. This will involve companies taking a cautious approach and not rushing back to where they were before March. I have spoken to businesses who are slowly reverting back to full capacity, who have told me they have experienced some of their most profitable trading results during this epidemic. The key question is why? Use this information to rethink or reshape the business model going forward. Many companies have turned to digital technology to help weather the crisis, preparing for new ways to operate and serve clients and customers once we reach the other side. Again, before reverting back to the comfort of your existing model, how can you improve this with what has been learnt over the last 6 months.  

Keep counting cash flow

There is an old saying, “cash is king” and never has that been more true than today. Businesses don’t just fail because they make losses, they fail because they run out of cash and the current climate has certainly put a strain on the working capital of many businesses across all types of industry. Many of my clients have made the most of the wide-reaching assistance from the government. It is important to note however, whilst being very welcome safety net for these businesses, it is critical to be measured, and assess the future impacts of using the assistance. It’s not money for free at the end of the day, so the repayment of any loans must be factored into your calculations on your cash flow going forward.  

Communication is key

Communication of your business plan is essential. The majority of businesses rely heavily on the importance of their employees. Keeping employees motivated and invested in the business will also be important in navigating through these uncertain times. Consider an open and transparent approach to the business’ strategy by communicating regularly with staff, which not only helps to allay their fears in this uncertain time, but also helps them to see the bigger picture and will keep everyone pulling in the same direction.  

Talk to our team of Birmingham Accountants and Business Advisors about coming out of lockdown stronger than ever and getting your business planning started.