The start of a new year often brings many ‘experts’ telling business owners that they must set goals and financial targets.
While we agree that your business and personal plans could be more regularly reviewed and monitored, we believe that the start of a new year is best first spent reflecting on the previous year, asking yourself where you want to be, and having a business reset.
In fact, the best companies and leaders know that reflecting on your business increases innovation, performance and relevance.
But how do you go about it?
A good place to begin is to think about why you went into business in the first place.
Was it because you wanted to earn more money? Was it because you dreamed of being your own boss (and enjoying more freedom)? Or was it because you believed you had something valuable to offer?
We all have different reasons for doing what we do, so be honest.
Once you’ve answered that, ask yourself if you’re currently doing what you set out to do. If you are, great, you’ve followed your original intention. If you’re not, why not? What has led you to this place?
Once you’ve asked yourself the ‘whys’, next contemplate the ‘whats’:
What do you really want to achieve over the next 12 months?
What is it that you enjoy, and how can you do more of that?
What is it that frustrates you, and how can you remove or minimise that?
There are many questions we can ask ourselves to help gain clarity, and documenting them tends to make things clearer.
It’s important to think about things from both a financial and non-financial perspective.
Once it’s all down on paper, you have a roadmap to follow and can start planning how you’ll make any necessary changes.
But while planning is important, monitoring and accountability are equally as important.
As well as reflecting, the start of a new year is also a good time to look at the current market and consider how it may potentially affect your business.
Right now, we’re still seeing continued inflationary pressures. As a result of this, business costs are expected to keep rising – from fuel and electricity to insurance and labour. Material costs have also increased.
Because of this, take the time to review your pricing. While making price increases may not suit your customers, you risk your profit margins decreasing otherwise.
In addition to this, review your business expenses. Are there ways you can reduce costs, for example, by changing suppliers or reducing payroll by outsourcing?
It’s now the eighth month in a row that the cash rate has increased, and more hikes are expected. What impact is increased funding costs having on your business and you personally?
It may be a good time to review your borrowing capacity as it has likely changed. Could refinancing or a potential restructure be a good move in 2023?
We also recommend taking some time right now to review your business assets, structure and personal wealth position.
If you own investment property, is there an opportunity to increase rental income at the next review?
What’s the value of your assets? Even with recent decreases in property values and the share market, we suspect they’ve risen since you last reviewed them.
If the value of your assets exceeds debt, can you leverage them by borrowing more against them to further build your wealth and/or fund your business?
If you have too much debt, do you need to refinance or restructure debts and/or sell down some assets, particularly if servicing is becoming more difficult due to interest rate increases?
Estate planning is vital when you’re running a business.
Not having a plan in place can cause problems for your business and your family after you’ve gone.
Planning can help you dictate what will happen to your business when you die or can no longer manage it. It can also help you avoid excess taxes and debt and facilitate your business’s continued success.
So, if you don’t already have a current will and estate planning documents, add these to your 2023 to-do list.
This review can also consider if your business ownership and assets are protected in the event of a key person's death. Also, ensure you’ve minimised tax in the case of an unplanned event.
While goals and targets are important, these are better started from a point of clarity, something a business reset following the above steps will help you achieve.
If you need a fresh perspective on where your business is now and where you want to get to, we offer personalised business advice to help you reset. Get in touch.