*This article is brought to you by Sanlam Business Market
By Jannie Roussouw*
The South African economy is having a challenging year, and this along with a very volatile currency is placing the Reserve Bank under pressure to take tough decisions regarding inflation. Every South African entrepreneur will be feeling the pinch – and may also experience a dose of panic. Jannie Rossouw, Head of Sanlam Business Market, believes that proactivity is absolutely critical in this climate. “Business owners should be taking as many proactive steps as possible to cushion their business against these blows.”
Here he suggests five ways businesses can ‘bulletproof’ their business in the tough trading climate.
- Understand exactly what can go wrong:
Know that a fluctuating currency, rising inflation and hiking prices may well lead to cancelled contracts or drops in sales – try not to get caught unawares. Working with professionals – such as a financial advisor, accountant or risk assessor – you can plot out the biggest risks which are likely to impact your business. Once you know what can happen, make sure that you are ready! Develop a 360 degree plan of action against these risks should they occur.
- Budget for price increases:
The ongoing risk of power outages, postal delays, droughts and strikes are impacting South African business owners often. Rather than hoping they go away, budgeting in advance for price hikes or unforeseen costs is critical to a business’ financial readiness. So include diesel for the generator or courier fees to cover the postal strikes in your budget.
- Cut costs wherever you can:
First make sure you have a true reflection of the cash flow status of your business. Many business owners manage their finances via their bank account, but this gives a very short term view of cash flow. Getting into the habit of doing a cash flow forecast is extremely useful. It will help you identify areas in your business where expenses can be trimmed down.
- Keep your policies even when times get tough:
The temptation to cancel insurance policies when margins are tight can be extremely alluring. It is, however, critical to hang onto your policies – from life to vehicle finance – as they are there to protect you from financial disaster. They could be the very things that save your business in tough times.
- Don’t neglect your own personal financial plan:
Many business owners neglect their personal financial plan and focus mainly on their business’ ‘needs’. But part of bullet-proofing your business, is ensuring you will be financially covered if your business does suffer a setback. You need to make sure you and your family are covered if you become disabled, if you get a dread disease or even in the event of your death. Depressing stuff, but it unfortunately can’t be neglected.
Rossouw says that taking stock of how your business performed against your business plan is even more important. Pull out your business plan and make a comparison between what was planned and what actually happened.
“Of course, if you don’t have a business plan, you will be trading ‘blind’. I definitely recommend taking control of your business outcomes, drawing up a strong, robust business plan as soon as possible,” concludes Jannie.
- Jannie Rossouw is the Head of Sanlam Business Market. You can email him [email protected].
