Future proofing your business – the measures a business must have in place
A must read for all business owners – in the New Forest and beyond
Sandeep Sesodia is Director of New Forest based MGPS Commercial Ltd which arranges commercial finances. He is well qualified to talk on these matters, having been been considering the many impacts of the coronavirus both economic and human, on businesses large and small. As we learn to live with its legacy he shares his thoughts about the steps businesses can take now to put themselves in a strong position to face the future.
So, we ask, what does future proofing mean in today’s parlance?
“I’d say future proofing as we exit the coronavirus “crisis” and adjust to the new normal, is a kind of combination of best practices in order not only to survive but to come out ahead of the game.
Irrespective that COVID 19 has shown that nature is "red in tooth and claw", it is now a case not only of survival of the fittest but also, those willing to adapt.
Because one thing is for sure, COVID 19 has been a wake-up call.
At its simplest future proofing is about surviving, continuing to trade. Then it’s about anticipating the future by doing the homework – identifying threats and opportunities. And pragmatically about being aware of real potential shocks, the possible stresses and hurdles of future events and eventualities.
It’s not about borrowing!
Although monitoring the business finances is vital, it's not all about borrowing!
Borrowing alone is not the answer. So many business have taken advantage of the government grants or loan schemes - or both! Right now, it is more about having good business acumen and a fit for purpose operating model at all times. Applying common sense along with having good practices will be the key. So, it is informing businesses "what good looks like". That means right NOW! So it is informing businesses “what good looks like”.
So, what measures must a business have in place to survive and to continue trading?
Good housekeeping is essential. Translated, this is good governance, being disciplined, diligent and having a checklist to ensure the longevity of the business. This should always be in place so that measures are in place to safeguard and protect the business / future proof itself.
This means having
- A business strategy along with the business vision and goals
- controls and monitoring in place, a sustainable operating model, having a robust Business Plan, a Business Continuity Plan (which should include a Business Recovery Plan and a Business Impact Analysis) and a (COVID 19) risk assessment / risk mitigation procedures
- A template in place to measure individual and business performance and adapt / update as necessary
- Robust financials and financial reporting in place
- Experienced and qualified management team / structure
Businesses should not be daunted by having a checklist. The checklist is simply comprised of everyday business activity, common sense and good practice and will allow a business owner to carry out a health check.
In arranging commercial finance, the priority for mpps commercial ltd is to carry out a health check on a business looking for funding. Here are some of the typical considerations:
Is the business keeping pace with change e.g. Investing in the business, technology, staff, training / upskilling, recruitment etc?
Is slick administration in place to ensure efficiencies, a streamlined and lean process?
Paperwork and accreditations must be up to date – are records kept? Has the business faced up to the requirements of GDPR and put appropriate measures in place?
Are Compliance and regulatory obligations and responsibilities kept up to date?
Is tax paid up and up to date? Is the business benefitting from tax breaks, allowances, Government grants and schemes?
Are security and safeguarding procedures in place e.g. entry into buildings, ID checks, adequate insurance, cyber security, HSE, Fire Regulations?
Are products and services relevant? Is diversification required?
Is the business aware of and alert to the market conditions, market forces and any changes e.g. legislation?
Is a competitor analysis carried out on a regular basis?
What business activities are kept in house and which are outsourced e.g. HR / Employment law, Payroll, accounts / bookkeeping?
What is the business’s policy on the environment, its Carbon footprint, its CSR activities?
Above all a business must maintain communication with its business partners and professional advisers including the bank, the accountant and other qualified business advisors and mentors.
Business life cycle and succession plan or exit strategy
Consideration should also be given to the
- life cycle of the business and natural growth
- succession plan / exit strategy
A business will want to demonstrate to all and any 3rd parties the financial strength and financial stability of their organisation. That there is growth potential and that the business is fit for purpose e.g. to potential buyers or for the future sale of the business.
Some organisations and potential clients will only deal with businesses that display these characteristics.
From a borrowing perspective, all lenders will want to evidence these characteristics because these will form a part of the lending criteria. So, they will seek comfort and reassurance to understand the purpose of or rationale behind the finance application. Understanding this will determine the appropriate facility and the structure of the borrowing.
There are approximately 140 commercial finance lenders at present. They range from High Street Banks across to those with an online presence only, to specialist lenders to Alternative Finance, Private Equity Firms and to Crowd Funding platforms. Therefore, being specific about the borrowing need is critical. Gone are the days of one loan fits all.
The Business Plan, including the latest financials (the latest filed accounts, Management Information and cashflow forecasts / projections - sensitised and stress tested - together with the underlying assumptions) is a must. The cashflow analysis is critical because it will signal whether a business can service a debt. Otherwise how can a business calculate how much to borrow or how can a lender assess how much a business can afford to borrow?
Reviewing the Business Plan and monitoring the cashflow forecasts on a regular basis to ensure that there is sufficient working capital is vital, as is having a 30/60/90 Day Plan. Carrying out a SWOT analysis and a risk assessment will be extremely important.
So, the Business Plan must exemplify prudence; it must clearly demonstrate a viable operating model, financial strength, and stability. It must address, for example, what
- income generating activities are being undertaken?
- is the pipeline business?
- are the future revenue streams?
- is the position with the debtors (including bad debt) and creditors?
- growth plans are in place?
- diversification is planned?
- use will be made of the current skill base?
There must be a candid analysis of what business as usual looks like.
Before approaching a lender, a business / owner must ask themselves: Would I lend to myself? If so, what information would I want to see to reassure me and convince me to agree to lend?
Business resilience is something that is being much talked about. What does this mean? It means surviving and the actions to take to enable this – medium and l-term; operations; When to return? How to return? Standing back and re-imagining etc.
This leads to recovery and similar issues to consider:
- How impacted by COVID 19 and how coming through it? Distancing, face masks, shields etc
- Impact of new legislation
- Strategic analysis of the business products and services: what works and what does not
- Cashflow implications
- Will the business be able to change and adapt?
- Relevance and value
- Workplace
- Online presence and increased usage for target audience, therefore an improved offer to customers and potential customers
- Identify new opportunities
- Business agility
In terms of Cost Control, in reviewing the operating model the business must aim to make it leaner, more streamline and assess essential costs – overheads, fixed and variable costs (rent reviews / negotiations) and of course staffing and wages. This will be a tough exercise but it is about sustainability and survival.
Therefore, for any challenges or issues the business has faced it must provide explanation and commentary on how the matter was addressed and the solutions identified.
An honest appraisal and transparency will be needed.
COVID 19 has indeed been a wake - up call. However, we must remain positive and think of our business in a different dimension and be entrepreneurial. Remember, as history has shown us time and time again, crisis breeds creativity and innovation.”
Sandeep Sesodia is a Board member of The New Forest Business Partnership; Chair of Southampton Connect (Business Partnership working with Southampton City Council and represented by private and public organisations in Southampton); Non – Exec Director, Partnerships Portfolio Hampshire Chamber of Commerce; Chair Southampton Business Board, Hampshire Chamber of Commerce 2015 – 2020; Enterprise Adviser, The Careers & Enterprise Co, Solent LEP; Governor, Highcliffe School; Chair, Humanities, Highcliffe Rotary Club and Vice President Bournemouth Cricket Club.
For an initial discussion with Sandeep please contact him on 07388 908919 or e-mail him at This email address is being protected from spambots. You need JavaScript enabled to view it.
Sandeep Sesodia
June 2020
Jo is naturally curious about what makes people tick, driven to make an impact on how people feel about and perform at work. She is known for establishing early trust, encouraging staff to open up and tell her how things really are, enabling her to really get to the nub of what’s going on.