Ask a business owner how things are going and you'll usually get one of a few answers. "Steady." "It's okay, we're plodding along." Or, as I heard so often in Durban, "Eish, it's tough, hey," usually from someone who has just booked their third holiday to Bali.
We rarely say what's really going on. Sometimes "tough" just means harder than last year, even though we're spending more and living better than ever. Sometimes business is good, but we don't want to say so, because we don't want to make the owners who are struggling feel bad. So we default to the safe middle answer: it's okay.
But whether your business is booming, struggling or plodding along, "okay" hides a more important question. Not how are things today, but how ready are you for tomorrow?
Because look at the last few years. A virus that shut the world down almost overnight. Wars on the other side of the world that pushed fuel and food prices up right here at home. Interest rate hikes, load shedding, a key supplier closing its doors. None of that was in anyone's business plan.
The only thing that is certain is uncertainty. The question isn't whether something will shake your business. It's whether you'll be ready when it does.
Remember the airlines?
Within a year, South Africa lost two of them, almost overnight.
On 27 July 2021, Mango suspended all flights. Passengers found out by SMS just before nine in the morning, many of them already standing at the airport. The reason: about R58 million owed to Air Traffic and Navigation Services. More than 300,000 tickets were affected, and four years later passengers were still waiting for a proper refund process. (TimesLIVE, IOL)
Less than a year later, on 1 June 2022, Comair, the company behind kulula.com and British Airways in South Africa, grounded every flight. It held around 40% of the local market and was on track to carry over four million passengers that year. But jet fuel prices had shot up after Russia invaded Ukraine, and when the funding it needed didn't arrive in time, the planes simply stopped. Two weeks later the company was in provisional liquidation, with more than 1,200 jobs on the line. (Daily Maverick, The Citizen)
These weren't small, unknown businesses. They were household names with busy routes and full planes. Busy isn't the same as ready.
Where most businesses are exposed
No war chest. Cash flow is the oxygen of a business, and a war chest is the spare tank. Many owners run month to month, with every rand already spoken for. When a shock comes, there's no room to think, and desperate businesses make desperate decisions.
One big client. Are you sure the client that brings in most of your turnover will stay with you forever? They can restructure, change buyers, find a cheaper supplier or be bought out. One phone call, and the work that paid your salaries is gone.
Too busy to market. This one catches good businesses all the time. Work is pouring in, so you stop marketing because you can't keep up. Then the big job ends, the pipeline is empty, and it takes months to fill it again. Feast, then famine.
Costs you don't control. Fuel, electricity, imported stock, the exchange rate. If your margins are thin, one price jump can wipe out your profit for the year.
Security is a feeling, not a fact. Feeling steady is not the same as being ready.
How to reduce uncertainty
You can't remove uncertainty, but you can reduce it and build more certainty into your business. It isn't a reason to panic. It's a reason to prepare. Here's where I'd start:
- Build a war chest. Put a set amount aside every month until you have a few months of running costs in the bank. Treat it like a bill you have to pay.
- Spread your risk. Work towards a client base where no single client is big enough to sink you if they leave.
- Never stop marketing. Keep a small, steady amount going even when you're flat out. The best time to fill the pipeline is while it's still full.
- Know your numbers. Have a simple cash flow forecast and know your break even point. You can't prepare for what you can't see.
- Ask "what if" once a year. Sit down and ask: what if my biggest client left, fuel went up another 20% or I lost my key person? Write down your plan B before you need it.
How ready is your business?
Take five minutes with these questions. Be honest:
- If my biggest client left tomorrow, how long could the business survive?
- How many months of running costs do I have in the bank right now? And how many would I need to feel more certain?
- Have I stopped marketing because we're too busy?
- If fuel, electricity or interest rates jumped again next month, what would it do to my profit?
- What is my gut telling me that I keep ignoring? There's usually something. A client who's gone quiet, a market that feels different, a decision you keep putting off.
You can't control what happens in the world. You can control how ready you are when it does.
Want to see how ready your business really is? Take the 10 minute Business Driver Scorecard. Or if your gut is already telling you something, let's talk it through.