Recent reports from market commentators on the economy cover ‘’doom and gloom’’: –
- House prices falling in Auckland
- Shortage of people to fill job vacancies
- Business pessimism – some Government and tax related
- Tourism numbers down
- Business investment weak
- Dairy prices retreating
- Interest rates at unprecedented low rates and trending down.
- Lower NZD exchange rate
- US/Global trade issues
- Brexit fall out (either way)
This is all coupled with continuing low inflation which is also unprecedented.
Most of these, we have no control over, but are part of the environment we need to operate in.
With low borrowing rates, investment into long term assets has never been cheaper – if you can get the money.
Investment into technology and business innovation has also never been cheaper and is now crucial to enable replacement of jobs with new alternatives.
All this requires new ways of doing things and much lateral thinking.
The big question then is ‘’How should we adapt?’’ followed by what new strategies (including defensive strategies) do we need to adopt?
The world is changing at an ever-increasing pace, so doing ‘’what you always did’’ is no longer an option.
The risks are greater and therefore greater adaptability is needed.
- Develop an updated Business Plan using information and business intelligence from the marketplace.
- Prepare Budget Forecasts for 3 years.
- Re-Engineer your business to define
a) people/job needs
b) investment in technology
c) changes needed in business processes
d) what continuing infrastructure and costs are needed
We are here to work with you on these strategies and plans.
Defensive Strategies Include
- Be cautious and assess risks before major changes
- Accelerate debt reduction while interest rates are low
- Keep strong control on costs and overheads. Each item in your Profit & Loss needs to be justified – if not, get rid of it.
- Avoid long term commitments unless balanced by long term assured income and cash flow.
- Simplify your business structures where possible. This will reduce longer term costs even if costing more in short term.
- If you are in a ‘’sunset industry’’ look at ways to get out or move into new technological areas to diversify or keep current.
- Consider taking on contractors instead of staff. That eliminates all the employee add ons. Meaning you pay for what you get and can be more flexible. This can include outsourcing. This needs to be considered carefully as there are negatives to factor in.
- If you have surplus funds, then get advice on where to put those to get good returns consistent with risk. Diversify these away from your business.
- If you are a borrower, get advice on
B) breaking and fixing at a lower rate
c) restructuring loans to get tax deductibility in the right place.
Our role is to act as a sounding board, to challenge and improve your ideas and strategies. Then to put number around that, to monitor performance against expectations, and to collaborate where deviations occur. These can be positive or negative.