Business Sustainability, have you got yours balanced?
Sustainability is one of the hardest obstacles to measure. It’s difficult because “sustainability is about making a future prediction of an occurrence that hasn’t happened yet”. It can be stressful and rewarding at the same time.
“Sustainability is the Business Resilience Measure that Prolongs Business Life”
Being sustainable means:
- The business has managed a retained equity position that can support the business if placed under financial difficulties for a set period of time, and
- The business retains service offerings that compliment each activity in a manner that off-sets any potential market/industry risks, and
- The business has identified opportunities, and goes about capitalising upon those opportunities, creating initiatives to promote its long term strength.
So how do we measure it?
We need to make a few assumptions based upon our regular business activities:
- Do we have any signed long term contracts?
- Does the business have any reducing revenue stream/s?
- Who are our key customers?
- Why do those key customers use our business?
- What industry do we rely on the most, and, are there any others that are also critically important (20% or more is critical)?
How do we fix it?
There are many ways to look at businesses, here are a few common ones:
- Have an exit strategy; a method where the business owners can capitalise on their hard earned work, or
- Create a business approach that can be marketed and grown, finding niche opportunities that support customer demands, focus on those areas for growth and drive business through multiple business outlets or through online e-commerce, or
- Discover other complimentary services or products that can simultaneously support the focussed revenue stream of the normal business operations, complementary services need to support customers and/or create new customer opportunities, and
- Look for an innovative solution where increasing product or service costs are encroaching on revenue stream and profit margins. Develop a process that rectifies inefficiencies and increases retained equity, and
- Manage a comfortable level of debt, retain equity to absorb any debt bubbles and interest increases; self-finance can be difficult, but open finance can be a business killer, and
- Keep the business structure lean and focussed, don’t overdo employment and contracting when it doesn’t need it. Increase employment at the point where it needs to be increased, try not to employ early as circumstances can change.
Remember that business is all about providing customers with what they want…..
“Under Promise, Over Deliver”
The sustainability of a business is about acknowledging future changes, operating the business on the basis to out-perform its competition, if placed under stressful market/industry conditions in the future. The difference between sustainability and insolvency is the manner in which the business has prepared for the worst case scenario.
Written by Geoff Pike, Entrepreneur, Speaker & Business Mentor
LinkedIn: https://www.linkedin.com/in/geoff-pike-australia
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ABOUT GEOFF
Geoff founded a sole trader plumbing business in a remotely located and vastly underpopulated location in outback Australia. Starting business with only enough money to pay 4 weeks wages, Geoff persisted by growing the business into a multi-disciplined trade services company. Over a period of 12 years, the company Geoff established grew to employ a workforce of over 300 personnel covering an area almost half the size of Europe, receiving international award recognition with an annual revenue of over $30mil. Geoff knows what it takes to overcome adversity.