Bullet-proof your business

Bullet-proofing your business – who would have thought that a bunch of dodgy US home loans could cause so much havoc? But the news isn’t all bad. There’s a lot you can do to protect your business against the slowdown. What a difference a year makes! This time last year, the main problem facing small business owners was prosperity. How do I grow my business without running ahead of my financial resources? Where do I find qualified staff when skilled people are in demand? How do I cope with rising interest rates? Twelve months later and the picture is very different. Economic growth has slowed, with many small businesses feeling the pinch. In December, job advertisements fell for the eighth month in a row and unemployment rates rose (although only by a small amount). Meanwhile, the Reserve Bank has joined other central banks around the world, slicing interest rates by 3% in an effort to stimulate the economy. At the time of writing, US official interest rates were only 0.5%. And the Bank of England had cut rates to 1.5%, their lowest level in 315 years! So what can you expect in 2009? What does it mean for you and your business? And what can you do to bullet-proof yourself against the slowdown?

The outlook for 2009

If ever Australia was the lucky country, now’s the time. Where many other major economies are already in recession, it’s still possible we may escape relatively unscathed. “ A global recession is underway,” says Michael Blythe, Commonwealth Bank’s chief economist. “Australia is not immune. But we should fare better than most.” Blythe points to a range of factors that are likely to insulate Australia against a global slowdown, including our strong banking system, lack of sub-prime risk, healthy demand for housing, the drop in the Aussie dollar, and the rapid-fire response from policy makers. A lot depends on how consumers respond to the stimulus recently provided by the Federal Government and the Reserve Bank. Towards the end of 2008, spending stagnated as consumer confidence collapsed. It wasn’t necessarily that people didn’t have money to spend — real household disposable income grew 6.1% a year for five years. It’s just that they’ve been holding onto it instead, with saving rates climbing to their highest level since 2000. Since then, the Federal Government has launched an economic stimulus package, while Australia’s 8.3 million home-buyers have benefitted from a 3% fall in interest rates and motorists have seen big drops in the prices they’re paying at the bowser. According to CommSec chief equities economist Craig James, that adds up to around $13 billion extra in consumers’ pockets. James calculates that if consumers choose to spend that money, it could boost quarterly household spending by between 5% and 8%. That’s without the government tapping into the $26 billion in infrastructure funds at its disposal. What does it mean for your business? There’s no doubt that sluggish consumer spending has the potential to erode business profits. In the latest Commonwealth Bank/ACCI Business Expectations Survey, indicators of sales revenue and profits were at their lowest levels since the survey began 14 years ago, with 42% of businesses expecting profit growth to fall. Yet, so far the effects are patchy, with some sectors and businesses as yet unaffected. All the same, it makes sense to be prepared for tighter trading conditions, even if they don’t eventuate. This is a good time to get back to basics and make sure that you’ve got the fundamentals right. That way, you can build a stronger business that will prosper now and in the future. So here are some ideas to bullet-proof your business.

Planning and processes

Now’s the time to pull that business plan out of the bottom drawer and update it with your goals for the year to come. Make them clear, achievable, and measurable, then create an action plan for each goal. Date each action and state who’s responsible for it, then follow up. Next, re-examine all of your business processes. Do they give you the information you need to run the business effectively? Are they delivering for your customers? Can they be streamlined to cut costs? Often it’s about getting a lot of small things right. For example, cutting Christmas call queues isn’t only about employing temporary phone staff – it can also be about putting better information on your website and improving logistics, so customers don’t need to call.

To do list

  • Update your business plan with specific, measurable goals for the downturn.
  • Re-engineer your processes.
  • Measure everything about your business, from the number of leads each month to the profitability of each product you sell.
  • Create a cost-control culture, seeking input from your staff for cost-saving ideas.


As the economy slows, your cash flow could come under pressure. An October 2008 survey from Dun and Bradstreet found that businesses were taking longer to pay their bills, with average payment terms blowing out to 55.2 days, so cashflow pressures may already be beginning to bite. To stay on top of cash flow, you first need to know where you stand. That means creating a cash flow forecast, then tracking incoming and outgoing cash religiously. Consider running some projections for a worst-case scenario, then putting a plan in place to deal with it. Online banking tools can give you an up-to-the-minute snapshot of your cash position at any time of the day or night. You also need to get your business banking in order. With the right business cheque account, you can get easy access to your cash and the ability to move any excess funds quickly and easily into a high-interest online business savings account. A lot of cash passes through your business, so a high-interest account can help you make a return on it, even if it’s earmarked for someone else. And a short-term finance tool, like an overdraft or a credit card, can be handy when those bills start flooding in while your customers are slow to pay.

To do list

  • Create a cashflow forecast and track your cash position each week.
  • Review your accounts receivables process. Make sure you’re invoicing promptly and following up overdue accounts.
  • Make it easy for your customers to pay electronically – by BPAY, direct debit, funds transfer or card. That puts money into your bank account sooner.
  • Consider extending the range of banking services you use to improve short- and long-term access to cash.


If cash flow starts to suffer, then your financial resources could be stretched. So it pays to have a cash reserve ready in case of contingencies. Start squirreling some money away or approach your bank to put a finance facility in place. If you think you might need to talk to the bank, then it’s best to do it ahead of time, while your business is performing strongly.

To do list

  • If possible, keep between two and six months expenses in reserve.
  • Put finance facilities in place now; don’t wait until conditions tighten.

Sales and marketing

When times are tough, too many businesses see marketing as an unaffordable luxury. The truth is, marketing is more important now than ever. But that doesn’t mean it has to be expensive. Recent research from the Commonwealth Bank and Investment Trends found that some of the most effective sales and marketing tools were also the cheapest, including email, online customer newsletters, networking, and referrals.

To do list

  • Make sure you have a great customer management database in place. Identify and target your most profitable customers.
  • Don’t stop marketing, but make sure your marketing is targeted. Highlight products and services with special appeal in the current environment.
  • Understand your unique sales proposition – your point of difference – and promote it tirelessly.

Bernard Tanner is the Chief Operating Officer of Commonwealth Bank Local Business Banking, a specialist division dedicated to the needs of small business clients. Bernard has more than 20 years of experience in the financial services industry, including roles in financial and management accounting, banking, and stockbroking.

Content provided by the Commonwealth Bank of Australia

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