Don’t just work in your business – get to work on your business

*This article is brought to you by Sanlam Business Market

By Jannie Roussouw*

Sacrificing special holidays and spending any available spare time on business matters is par for the course for most business owners. But many become so busy working in the business that they forget to work on the business – and this is where strategic financial planning is crucial, says Jannie Rossouw, head of Sanlam Business Market.

“Working on the business means you don’t lose your objective for starting the business in the first place. For most business owners, the aim is to create a livelihood for themselves and to use this asset as a wealth creation vehicle that will leave a legacy for generations to come. To ensure that business demands don’t divert you from this objective, strategic financial planning becomes critical,” Rossouw says.

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He says business owners need to consider the following:

  • Strategic financial planning is not just another pillar you can add along the way as the business grows. It’s the foundation from which all your other business pillars should be built. “Everything you do in your business – from the moment you open its doors – requires you to have a financial planning strategy.”
  • The circumstances of every business are different, and a strategic financial plan takes into account your specific goals and circumstances. It also reflects the particular phase of your business. So as the business grows, it should take into account these changing risks and capital needs.
  • A strategic financial plan should be an inherent part of the business plan rather than an ad hoc response to financial challenges that arise from time to time. The 2015 South African Institute of Chartered Accountants’ (SAICA) insights report into the affairs of small and medium enterprises (SMEs) showed that the main reasons start-ups fail within the first three years are overwhelmingly cash-flow related. “And what is at the heart of most cash-flow challenges? A lack of financial planning and control,” says Rossouw.
  • A strategic financial plan will ensure that your plans for your business aren’t diverted or halted by risks that you can mitigate. Mitigating risk related to financial planning is often one of the most neglected aspects of overall strategic planning in a business. “Such risks include, but are not limited to, the possibility of you or your business partner(s) dying or becoming permanently disabled, as well as needing to finance the replacement of a key member of your staff.”

Face-to-face interviews by Sanlam with 200 business owners showed a large number have no insurance in place to finance personal sureties signed for business debt. “During tough business cycles, many business owners sacrifice surety insurance as they try to stretch their cash-flow between many competing business input costs.”

Rossouw says tough economic times call for business owners to focus on their businesses more than ever to ensure continued business sustainability. “Comprehensive and strategic financial planning is part and parcel of this process – if you neglect this aspect, unforeseen circumstances and difficult times might hit you harder during challenging business cycles,” he concludes.

  • Jannie Rossouw is the Head of Sanlam Business Market. You can email him [email protected].