Resilience is critical to short and long-term business success.
How do you build a financially resilient business?
The term “resilience” is everywhere right now. But before you dismiss it as just another COVID-19-related buzzword (hello “pivot”!), the financial resilience of a business has long been a key indicator of potential success. Which makes it something every business owner should be striving for, in good times and the more challenging ones.
What is financial resilience?
In short, financial resilience is the ability to withstand or rebound from financial shock. External events, such as the COVID-19 pandemic, have tested the financial resilience of many businesses, with business owners having to rapidly adapt and respond to ongoing setbacks and restrictions. Even some previously healthy businesses have suddenly faced extreme financial pressure, and their financial resilience is now more important than ever.
So, how do you improve your business’ financial resilience?
Facing a crisis might not seem like the best time to start thinking about your financial resilience, but unfortunately unplanned events happen all the time. More often than not, business owners need to build resilience rapidly in the short-term, to help them survive in the long-term. This can be achieved by making changes to things like costs, expenses, operation and staffing.
Resilience for the long-term
While there’s no magic formula for resilience, here are some measures you can take to build resilience into your business.
- Have a plan, with achievable goals. Map out the next 1-2 years of expected revenue and growth, identify any future funding gaps and secure funding before you need it. Be clear about what you’ll need to make your plan work. If you don’t have one, take a look at the ANZ Business Plan template.
- Balance growth with stability. It’s unusual for a business to grow without some form of financing, whether it’s for recruitment, buying new equipment, expending into new markets or new premises, or marketing to a new audience. Don’t over-extend yourself in the name of growth and be prepared for slow periods.
- Understand and manage your cash flow. If you haven’t done a cash flow plan and forecast now is the time to do one. If you need help, use the ANZ Cash Flow Forecast template. Build in a safety net so you can adjust for higher costs or reduced revenue. This is one area of your business you may want to seek expert help with, such as an accountant, business advisor or business banker.
- Build up consistent and recurring revenue. Imagine the confidence that comes with knowing a certain dollar amount will come through the door every month. Building a reliable and regular income is one of the ways your business builds resilience. Invest in your loyal customers, staff, suppliers and best products/services. We’ve developed some tips on creating purchase frequency or cross selling and upselling.
Resilience isn’t limited to your financial situation
Personal resilience has also become an even more critical and valuable attribute for business owners. The ability to adapt is an essential survival skill in a volatile environment. Visualise your business’ recovery as a journey and shift your mindset from reactionary responses, to one of planning and reinventing. Don’t forget to look after yourself - your psychological health and physical wellbeing can impact your ability to run your business.
It’s worth it
Building resilience takes time, energy, focus and regular review. But it’s worth it. A financially resilient business means you’re better equipped to handle whatever the economy, competitors or environment throws at you.