3 Strategies to Future-Proof Your Business

Australia is facing tough economic times. Anecdotally, I’ve had clients and business colleagues talk about how slow business is, how people just aren’t buying and how hard it is to win contracts. The competition for jobs is fierce and households are struggling to make ends meet.

For medium-sized businesses in the supply chain of large corporations, here are my top three strategies to future-proof your business:

1. Undertake rigorous budgeting and cashflow forecasting. Take these forecasts out for at least three years based on your best estimates of today. Then stress test them from all angles. Undertake what-if analysis to see the impact changes in revenue would have to profit and cashflow. Consider the effects of implementing efficiencies by looking at every aspect of business through an external lens of how you could do it better, more efficiently, with less cost or time involved.

   Another way of considering this is to start with a blank sheet of paper and work out what you would do if you started all over again now. What would you do differently, what would you change in all aspects of the business? Then with that information, update your forecasts implementing any of these changes in an appropriate time frame.

2. Make sure you have plenty of working capital and are up-to-date with your superannuation and taxation obligations. In the case of the latter the ATO has a strong commitment to chasing up outstanding debts and is not hesitating to put companies into liquidation to stop the continued increasing debt owed to the government.

   In terms of working capital, this does depend on the industry. A general rule of thumb is at least 6 months of costs held in cash or cash equivalents at all times. Agriculture needs a few years of costs in working capital as too often there are year on year either poor yields and/or poor prices due to factors often outside the control of the farmers. 

   I’ve recently been involved in a possible business acquisition where the vendor has reduced revenue, hasn’t reduced the staff levels whilst tendering for new contracts which may or may not come to fruition. However, the business didn’t have any working capital, so it is slowly getting further and further behind on payments to creditors, contractors, superannuation, ATO obligations and even wages to a few staff members. If this business had put aside money when it was doing well to have a cash balance to cover for the tough times it would be in better shape than it is today.

3. Implement ESG and carbon reporting into the business. Supply chain contracts require ESG reporting and even if your customer has not yet asked for the data, they soon will as mandated reporting comes into effect for large corporations on 1 January 2025. 

   With the long-term goal of carbon net zero emissions, every large corporation will be seeking to find suppliers who can provide carbon net zero figures to them. There are a number of ways of obtaining carbon net zero, but the first step is to know what the starting point is by preparing a carbon baseline report. Then armed with that information, work on a roadmap to reduce the emissions so that your business is attractive to your customer and they will continue with your contracts or it will help you to get new contracts as you get ahead of the competition for the contracts.

The future is bright for those companies working towards carbon net zero. Is your business going to be one of the companies of the future?

Want to learn more about how to get started on ESG reporting?

Join me on my free webinar to find out how.