In just two seasons from autumn to spring, everything has changed! From where and how customers work, to how they spend their money and entertain themselves.
This is even more true in the world of SMEs. Every single changed behaviour in organisations has had some or other budgetary implication.
But coming back to the consumer – society has covered a decade’s worth of ground when it comes to the adoption of digital. It all happened within a few short months. According to a McKinsey report on consumer behavior, Zoom has seen a 20-fold increase in usage over a three-month period and e-commerce has surged. Digital entertainment is on a runaway success, with Disney Plus achieving in five months, what took Netflix seven years!
Let’s bring it home to your organisation – change in consumer behaviour has taught us that things can pivot very fast and with a prolonged effect on business. Business owners… stay relevant! Be willing to adapt to these changes in customer behavior. If you’re in charge of your organisation’s budget, you would have been in good company if you had spent a gazillion hours this year on amending budgets.
And then amend some more.
Consider this the best investment you can make to survive and thrive again without having to cut costs, reduce salaries and reduce headcount if you don’t absolutely have to.
Earlier in the month we looked at why your budgeting process is your best offensive strategy and how this plan can bring transparency into your business during times when things seem out of control.
To move your business profitability and sustainability forward, let’s have a look at how you can turn a negative budget outlook positive again in three easy steps:
This may seem like stating the obvious, but when the difference between your recurring revenue and your expenses is negative, it means your monthly expenses are not being covered by your incoming revenue.
The solution on the one hand could be to find more revenue. If cutting your expenses, getting a loan, or dipping into your savings could hamper growth, now is the time to start building recurring revenue streams into your business by thinking creatively about what your customers could want. Where can you find new business or tap into new markets? If companies can turn on-demand kids shows, masks, sanitisers and delivery services into a recurring business opportunity, there is a way to get creative in your own business.
Focus on the things that need to change now to reap the fruit thereof somewhere in the future. What is certain, is that e-commerce will continue to grow. 42% of consumers have indicated that they will likely continue to shop online post Covid-19 according to data from ChannelAdvisor and research firm Dynata. Due to these changes in the lifestyles of customers it may just help to identify opportunities that can result in stable future returns.
Turn worse-case scenarios into your friend. Consumption declines and trading slumps are the hard reality as customers are less willing to spend. Confronting a ‘what-if’ budget scenario by including downturn insights. It will ensure that you do not get nasty surprises later on. This balancing act is good practice in preparing for the unexpected. It may even assist in identifying new possibilities.
Practically, it’s very simple. As you do with your household budget, start by prioritising your expenses. Which could you put off until later? Prioritise those expenses with the most punitive repercussions, such as your electricity bill, or connectivity network provider – you need those to conduct business, right?
Prioritising makes you aware of which expenses are the most important and which have some wiggle room.
Be cautious about seeing this as a long-term fix. But it is a helpful way to look at the worst-case scenarios. Having a plan in place gives us a sense of security. It can help us to stress less over what might potentially happen, because we are prepared for it.
Sound financial management, with the use of cloud-accounting tools like Xero, will enable business owners to track budgets and identify pitfalls like unprioritised spending in real-time. This means you can respond pro-actively to challenges in the budgeting and financial management process to ensure that you are always ahead of curveballs.
Reach out to your trusted advisor or accountant to assist you with the challenges that you may encounter. Or if you are still trying to wear all the hats at the same time, consider outsourcing the financial management function.
Just as it impossible to change the seasons from happening, it is impossible to control how you adapt to the budding flowerbeds during this Spring season. We end off with stressing how important it is to ensure that your business stays relevant and that it can adapt to inevitable changes.
By constantly maintaining sound financial management, preparing for curveballs, planning for what the future has to offer and focusing on what the customer needs will set your business up for long-term success.