When it comes to future proofing your business, there are many factors outside of your control, such as technological developments, new trends or a change in economic conditions, which can contribute to the success and longevity of a business. You need to plan and seriously look at what the issues and threats are that could affect your business in the years ahead, to future proof your business financially and protect your assets.
Business owners should focus on making the most of the business while it is returning a profit, whether that’s through paying off debt or by investing in assets held separately from the business such as investment properties, share portfolios or superannuation. It’s really important to map out the goals of the business and then through forward modelling look at different scenarios of how to achieve those.
If you can be planning five or ten years before an issue arises then you will be in a much better position to deal with it. Investigating your options can be quite confronting, but that is the role of a strategic adviser who should have those frank discussions with you and discuss the various options and scenarios.
Here is a financial checklist to future proof your small business and build wealth from it:
Understand where your money is going and what it enables you to get out of your business. Businesses that survive in a boom or bust environment have invested in financial strategies that take into account the ups and downs in their cashflow.
Create a saleable asset
Small businesses can be hard to sell if they rely on one or two key people who are at the heart of a business. It’s essential to take away reliance from those people and put in place well-documented policies and procedures. This is where planning again is essential; it’s not a two- to three-year plan but a five-to ten-year process to instil the right structure.
It’s important to keep up with the times, technology is always evolving and so should you. New systems could ensure you stay relevant and save time and money.
Extracting wealth from a business ensures you are building assets not just relying on the business to provide for you. Circumstances and conditions constantly change and if you haven’t been asset building outside of your business then you are very vulnerable to any changes.
While it comes down to individual circumstances, I’m a fan of paying down the debt on your own home, which takes the pressure off. Then if something happens in the business you will at least have that security behind you. However, others may prefer to invest in property or a product like super, there is really no right or wrong answer as it will depend on personal situations, ages and goals.
Small business owners need to think long-term, will their business be viable in 20 years or will the socio-economic or business conditions have changed and if so what is the back-up plan.