For small business owners, planning for the new year has been fraught with unique challenges since 2020 – and that trend will only continue as we head into 2023.
Recovering from the impact of the COVID-19 pandemic has been made all the more complex by emerging and persistent roadblocks to more routine operations, including global unrest, rising inflation, supply chain disruption and hiring difficulties.
But for advisors, this chaotic environment represents an opportunity to solidify the value their services bring to their business owner clients. As business owners are looking ahead to the new year, use the following four guideposts to help them navigate today’s unique landscape and empower them to reach their business goals.
Focus on liquidity. Forbes Council member Luz Urrutia of the Accion Opportunity Fund points out that with a potential recession on the horizon, business owners need to prioritize reducing expenses and conserving cash.
Advisors can help business owners improve liquidity by working with them to determine if there are ways to eliminate unnecessary costs, reduce overhead, renegotiate lease terms or vendor contracts, and ensure they’re optimizing accounts receivable with proper billing and payment processes.
Holding off on hiring is another way to increase liquidity, but business owners should make sure they’ll be able to keep up with expected client demand if they do so.
Put resiliency plans in place. As the pandemic and ongoing economic, geopolitical and operational uncertainties have taught us, it’s impossible to predict what’s going to happen next.
For small business owners, this translates to being prepared for anything – easier said, but certainly more conceivable with a dedicated plan in place to secure the business’s future by improving its capacity to absorb stress, recover critical functionality and thrive in altered circumstances.
Resiliency plans – the strategies and procedures business owners can use to quickly and effectively respond to and recover from a crisis – help protect the business’s assets, maintain customer trust and ensure the business is able to continue operations. Resiliency plans require identifying potential threats to the business, from natural disasters to cybersecurity incidents, and putting together strategies for responding to them, including backup plans for maintaining essential operations and access to necessary resources.
While it’s up to the business owner to understand the landscape of risk as it applies to their business, advisors should follow up with business owner clients to ensure their plans are in place, actively communicated to all employees, and up to date.
Review insurance coverage. Now isn’t the time to gamble with the financial or reputational risks that could arise as a result of improper insurance coverage.
And with research that indicates 40% of small business owners are uninsured, and 75% underinsured, advisors have a clear opportunity to provide valuable guidance to their business owner clients about the importance of insurance, especially at a time when a misstep could be catastrophic to the business continuing as a growing concern.
Help clients understand the types of insurance they need, as well as the amount of coverage appropriate for their business.
Maintain an accurate business valuation. More than ever, business owners need to understand the value of their largest asset.
Not only will a business valuation help business owners determine the amount of insurance coverage they need, but it’s also critical for making key business decisions at a time when relying on guesses or estimations could compound problems created by external factors.
If business owners require funding, for example, an accurate business valuation is necessary to help them acquire the financing or capital they need. Monitoring a business’s value over time, especially as economic trends change, gives business owners insight into the way they need to adjust operations, hiring, and expenses to remain on track to achieve their business’s goals.
While traditional business valuations took up to two months and cost over $8k, BizEquity’s valuation software makes it easy for advisors to run business valuations quickly, efficiently and accurately for their clients, as well as track the business’s value over time and analyze industry-specific key performance indicators to illustrate how the business stacks up against competitors.
