Photo from Unsplash
Originally Posted On: https://quickbooks.intuit.com/r/running-a-business/future-proof-your-business/
“Expect the unexpected.” This a saying we’ve all probably heard at one time or another, especially business owners. While we’re taught to always prepare for the unexpected—in personal, professional, and financial situations—sometimes events are out of our control.
Take the global pandemic for example. Given the unprecedented nature of this change in everything from economics to leadership, the act of future-proofing your business has become an absolute necessity for survival.
Future-proofing is strategically planning so your business will be able to remain successful despite any hardships or unexpected events that may occur.
Below, we’ll dive into nine ways you can future-proof your business and stay prepared for uncertain times.
1. Understand how the economy can affect your industry
The first step in preparing your business for unforeseen circumstances is to better understand how your business is impacted by uncontrollable movements in the economy. This means understanding whether your business is in a cyclical or non-cyclical industry.
- Cyclical industries: Businesses that are affected by changes in the economy and whose profits rely heavily on the health of the economy, like the travel and leisure industry.
- Non-cyclical industries: Businesses that are hardly affected by changes in the economy because they’re a basic need, like utilities, healthcare, and goods like groceries.
Tip: Identify how cyclical your business is given its performance post-pandemic, during the pandemic, and in more recent quarters. Or, if your business wasn’t around for previous recessions, look at the performance of businesses within your industry as a benchmark.
2. Analyze past performance
Analyzing business decisions you made in the past is a great way to come up with a proper strategy for the future. What may have worked for you one year may not work for you another—that’s all a part of evolving as a business.
When analyzing past business performance, look at things like:
- Financial statements to determine the financial health of your business.
- Customer satisfaction to determine how you’ve been able to retain customers.
- Competitor performance to determine any gaps in your strategy.
- Employee job satisfaction and performance to determine any areas you need to improve on internally.
- Advertising and marketing performance to determine where you should be spending your efforts to attract new and existing customers.
Once you take a good look at how your business has done in the past, it’ll make it easier to build a strategy for the future.
Tip: Set quarterly and annual business goals and develop key performance indicators (KPIs) so you always have metrics to look back on to help inform future business decisions.
3. Properly manage your finances for lean times
There are many competencies within your business, but when it comes to future-proofing, proper management of your business’s financial statements is of the utmost importance. Financial statements give you an understanding of the financial health of your business over a period of time. This can help you make better (and smarter) business decisions to set you up for success in the future.
The three types of financial statements include balance sheets, income statements, and cash flow statements.
Another part of managing your finances is ensuring that you have enough funds and resources on hand should any hardships or unexpected events occur. This is especially important while your business is in a healthy financial standing. Healthy financials in good times help reduce the impact of any bleeding in difficult times.
One of the most obvious steps is thinking about where you can save on costs to maximize your budget and spending. For example:
- Switching from traditional marketing spending, like direct mail, to more affordable marketing, like social media and SEO
- Offering electronic invoices to cut down on paper waste and postage costs
- Eliminating employee perks like free lunch or gym memberships and replacing those with valuable benefits
- Outsourcing tasks and hiring freelancers to save costs on hiring full-time employees
Here are a few additional ways you can future-proof your business finances:
- Secure financing while your business is in a healthy standing to help build your business credit.
- Use your funds to invest in resources like talent, technology, or software systems that will improve your business.
- Manage your balance sheet to ensure you have enough short-term assets to cover your liabilities for a year.
Tip: Utilize online accounting software to help you organize your finances and keep your financial statements up to date so you can make better business decisions and future-proof your business.
4. Listen to your customers
At the end of the day, your business can’t run without your customers. Part of providing great customer service—which 56% of small businesses say is one of the top secrets to success—is listening to your customers.
Listening to your customers helps improve customer retention, decrease customer churn, increase customer spending, and anticipate future wants and needs.
Listening to your customers means connecting with them and being open to their feedback. There are many different ways you can do this, including:
- Running surveys to gather insight and feedback
- Implementing a customer feedback feature on your website
- Running online focus groups
- Asking customers about their experience during the purchase phase
- Building relationships with customers through social media
- Staying up to date with mentions of your business online
Your customers are a great resource for gathering insight on your pricing strategy, product features, and marketing tactics.
For example, after customers buy something from your business, you can add a feature that can gather quick feedback from them at the time of purchase.
You can ask them questions like “How likely are you to purchase this product again” or “How did you hear about us/this product?” These simple questions can give you insight into whether or not people will pay for your product based on its current price and what marketing tactics are working to attract customers to your business.
Tip: Identify customer pain points and uncover their needs and wants by conducting surveys and doing research on consumer behavior to maintain a future-proof business.
5. Focus on vendor management
Vendor management is another focus that seems to fall to the back burner when times are good. Yet, if managed effectively during times of expansion, you’ll future-proof your business should a recession occurs.
Vendor management is the process of managing your small business vendors by doing things like selecting vendors, negotiating contracts and payment terms, and controlling costs. Here are a couple of ways you can stay focused on vendor management:
- Always benchmark vendors against their competition. Doing this will lead to more advantageous pricing, which will reduce your overall expenses, increase your cash flow, and inevitably future-proof your business.
- Negotiate payment terms. While out-of-pocket costs are important, so is negotiating for proper payment terms. Negotiate for everything possible and work diligently with your vendors to expand the number of days in which payment is due.
Tip: Be sure to establish clear expectations related to decision-making, deadlines, quality of work, and communication from the start. This can help avoid confusion and make it easier to come up with solutions that can lead to a long-lasting and healthy partnership with your vendors.
The pandemic taught business owners many things, one of them being that many tasks and operations can be done online. This goes for business operations externally and internally.
Our recent data found that half of small business owners say they are now doing business primarily online, so the digital experience should be a top priority for small business owners.
For example, chefs, bartenders, and event planners who relied on people walking in the door transitioned to online consulting, classes, training, and events. In this way, they reduced their overhead costs and expanded their clientele.
Internal technology is just as important to help your business become more efficient and make manual processes easier. Consider these digital tools to streamline your business operations:
- Project management tools
- Online accounting tools
- Internet phone systems
- Collaboration tools
- Time tracking tools
- Scheduling tools
- Help desk tools
Tip: Make sure you and your team are fully utilizing the online tools you invested in to make processes more efficient. If you aren’t using tools to their full potential, consider eliminating them and finding alternatives to save on costs.
7. Practice sustainability
Sustainability is becoming more and more important to consumers, as they want to support businesses that care about the environment. Our recent Sustainability Insights Survey found that 72% of small business owners also find sustainability important, with three in five saying they’re already making changes to reduce their environmental impact.
Here are a few ways you can future-proof your business by practicing sustainability:
- Invest in eco-friendly shipping materials: Compostable mailers, biodegradable packing peanuts, recycled cardboard, and consolidating the number of shipping materials used can all help reduce waste.
- Source sustainable products: Focus on looking for vendors and suppliers that are ethical and use materials that have minimum impact on the environment.
- Become paperless: Switch to online billing, digital documents, electronic receipts, and digital advertising to eliminate paper waste.
- Offer remote work: The need to have people in the office has decreased for many businesses and offering remote work (whether fully or in a hybrid model) can help reduce your carbon footprint by eliminating employees’ time spent commuting.
Implementing sustainable business practices can help you stay competitive in your industry, satisfy customers, and—more importantly—reduce your carbon footprint.
Tip: If you don’t know where to start, start with simple sustainable changes that still make a lasting impact, like switching to LED lightbulbs in your office to cut back on electricity or using sustainable alternatives when shipping products, like recyclable mailers.
8. Build a great team
Employing the right people is key to long-term business success. And when the going gets tough, you want employees that will stick with you through the good times and bad. This is why building a great team and company culture is crucial.
When hiring employees, make sure you’re finding the right candidates for the job. Look at your business needs and determine what skills candidates will need to thrive on your team. Hiring the wrong people can end up costing you later down the road.
Aside from hiring, maintaining a collaborative company culture can help future-proof your business. Lean on your employees for valuable insight about future actions you can take that support the longevity of your business. To do this, make sure you’re:
- Fostering team collaboration
- Encouraging employee feedback
- Embracing and implementing employee suggestions
- Promoting a culture built on trust and respect
Tip: Invest in your employees by offering learning opportunities, competitive salaries, and flexible work options. This can help maintain a healthy and happy workforce today and in the future.
9. Embrace change and remain open to new solutions
Change is inevitable no matter what industry you’re in. Every business makes mistakes and has failures—annually, quarterly, monthly, weekly, and even daily. The businesses that grow the fastest are those that actively identify their failures, are open to change, and implement immediate solutions to ensure a stronger foundation for future performance.
This could mean trying new technology, implementing new strategies, or hiring new people. When unexpected events occur, being able to know how to pivot will keep your business future-proof.
Tip: Revisit your business goals each quarter to ensure what you’re doing is still working. If something isn’t working, remain solutions-oriented to stay ahead of any future problems. From there, make any necessary updates and changes to your processes that will future-proof your plan.
Start future-proofing now
During unprecedented times over the last few years, we’ve seen innovation in its purest form. We’ve seen businesses built on retail brick-and-mortar leverage technology to reach their audience and the masses. We’ve witnessed businesses that depend on max capacity and high volume be creative, try new technology, and develop more effective operations management to stay future-proofed. And in many instances, we’ve seen effective cost-cutting measures where inefficiencies have been identified.
Unexpected events can happen at any time, making it more important than ever for businesses to remain open to change when they least expect it. Small business accounting software like QuickBooks Online can help you manage your business finances so you can stay prepared and future-proof your business for years to come.