Time to plan for growth
STEVEN LAW, a partner at Ensors Chartered Accountants, sets out the key elements for businesses seeking to survive and expand
REASSURINGLY, there are now signs that the economy is slowly expanding, but history has shown that more businesses fail coming out of recession than during and there are many dangers that lie ahead which should be mitigated by robust management action.
A business plan for growth will help you capitalise on opportunities and play to the strengths of your business. The key feature of the process is to look at a four sided equation: income maximisation (and protection); cost control; asset utilisation; and finally, liability control and gearing.
Income maximisation can be achieved by knowing what customers want from you, planning to stay ahead of the competition and avoiding excessive credit control risk. You might consider expanding into new markets or overseas markets may be within reach.
In terms of cost control, review costs and ensure that they are generating value for the business. Many businesses do not adequately measure financial performance, so that margins per product or service lines are not properly identified to assist with strategic decisions.
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Asset utilisation is key to maximising business performance. Assets should be made to “sweat”. This applies to disposing of unwanted properties or other fixed assets, exercising careful control over stocks and converting debtors to cash as quickly as possible.
The final side of the equation is liability control where businesses should plan to reduce gearing in anticipation of raising interest rates, review contractual commitments and ensure they are operating on the best possible terms with suppliers.
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Once the direction of the business has been determined, it is essential that robust forecasts are produced to identify financial performance and cash needs. These are an integral part of any business plan and it is essential that actual performance is monitored against forecast and decisions taken accordingly.
In conclusion, economic conditions are uncertain but will create opportunities for well-managed businesses. There is no better time to create a business plan for growth.
n Ensors, in conjunction with Access and NatWest, is hosting a breakfast briefing entitled “Removing barriers to business growth” to discuss some of the obstacles businesses are facing as they consider growth plans. The event takes place on Thursday, June 16 at Wherstead Park, Ipswich, from 7.45am to 9.30am. To register visit www.ensors.co.uk/events/17/ .Removing-barriers-to-business-growth/
This information is given by way of general guidance only, and no action should be taken solely on the basis of the information contained herein. No liability is accepted by the firm for any actions taken without seeking appropriate professional advice.