How to navigate your business through adversity
11 April 2023
For a business to survive turbulent times, the decision makers within that business need to be adaptable, ensuring their decisions are relevant and timely by having their “finger on the pulse”. Which means having up-to-date information, not information 12 months down the track – when preparing the tax return, for example.
Costs are continuing to increase all around us. With the devastation of Cyclone Gabrielle, COVID 19 still lingering, the Official Cash Rate increasing to 4.75% in February 2023, inflation still increasing (CPI annual inflation rate 7.2% end of December 2022 quarter), businesses, whether goods of services have been significantly impacted.
One saving grace could be the funding and help available for businesses impacted by adversity. Below are Cyclone Gabrielle web links for business grants available in our Hawkes Bay region for horticulture, farming and commercial businesses.
Understanding what fixed and variable costs are associated to your selling price or charge out rates is imperative as costs are increasing. By knowing what your profit margin is on goods and/or services you can have an understanding of how many products you need to sell and/or how many hours you need to charge out to cover your fixed costs as a basic.
It is important to notice the price increases from your suppliers in a timely manner so you can potentially pass these rising costs on. These increases need to be passed on by calculating new selling prices or charge out rates. If you don’t understand your pricing and don’t calculate new selling prices or charge out rates, then potentially you are at the risk of working for little or no profit and in some cases at a loss.
No doubt you have heard this before- up to date regular reporting and understanding what these reports are telling you is vital to help your business survive. This is hard when you are on your own or have a limited management team, not to mention staff relying on you to keep them in a job!
This is where a good advisor can help you understand your pricing, cashflow, create a budget - then look at the actual figures versus the budget figures and understand why there is a difference, understand what your fixed costs and variable costs are, current market and regional events, IRD and government assistance, but most importantly an advisor that will challenge you on the content and your thinking, then provide feedback and/or make suggestions. Making the investment in a good advisor will help you with your business now and in the future as you will learn significant skills to manage your business through turbulent times.
For more information on business planning and to speak to a business advisor, contact us through our website.
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