As the year draws to a close, I’ve been reflecting on what advice I would give someone who asked me, ‘What can I do to improve my chances of success in business in 2024?’
I’ve come up with 3 answers, based on my experiences in 2023 and my previous 30 years in business:
- Have a clear direction and focus, but be responsive;
- Understand and manage your balance sheet;
- Be patient.
1. Have a clear direction and focus, but be responsive
To be successful in business you need a clear direction and focus, and you must have conviction around that direction and focus.
However, you also have to be ambidextrous in the sense that, while maintaining your focus on your ultimate goal, your mind is attuned to the market, external and internal factors that might impact the business and where it’s headed.
That doesn’t mean you dart like a hare across the paddock, but the best business owners take in information through a number of sources in their networks and process it with an acute focus on learning what they don’t know, and testing what they do know.
Be open to learning
Many business owners get a few years under their belt, then wear it as a badge of honour. They think, ‘We know business; we just need to stick to our method and we’ll be right.’
However, it’s usually the business owners who put themselves in an uncomfortable environment, where they don’t know everything, that actually extend the value and performance of their businesses. Their ability to explore ideas that are innovative and different – and perhaps go against conventional wisdom – is what gives them a competitive advantage.
In business, confidentiality is important, but equally a problem shared is a problem solved. If you develop new ideas in a cone of silence and don’t pressure test them among your network, you’re selling yourself short.
People are very generous. If they’re not your direct competitors, you’ll find most people are very happy to talk about their business experiences. Failure can be a learning experience but it’s always better to learn from the failures of others, rather than repeat them.
2. Understand and manage your balance sheet
I was talking with a Sydney business owner last week who had just made a substantial investment in a new business, having developed it up over the preceding three years.
We were discussing financial accounts and I reflected on the experience of an early JPAbusiness client who only just survived the GFC because their balance sheet was very weak, heading into the crisis.
This businesswoman said, ‘My balance sheet is pretty weak at the moment because I’ve invested a lot of money in this new business and taken on a lot of debt.’
I said, ‘Look, at certain times, that’s what a balance sheet is for. If you have a strong balance sheet, sometimes you need to use it; draw up liabilities and debt in order to grow.’
However, over the medium to long term, a business owner’s objective should always be to build a strong balance sheet, because it’s the financial insurance against shocks and volatility.
Cash for a rainy day
A balance sheet is a dynamic thing, but it needs to be carefully managed to ensure you have cash and cash equivalents – liquid assets – set aside for a rainy day.
From my experience in the GFC, the businesses that had strong balance sheets – surplus assets and equity, and a strong level of cash liquidity – were able to make decisions that no other businesses could make. In some instances they bought distressed assets for a quarter of their market value, because they were in a position to do it.
3. Be patient
If I learned one thing in 2023, it’s to hasten slowly with business strategy, and also execution.
Implementing a business strategy is a dynamic process, especially in today’s volatile economic environment. Too many business owners are not dynamic and think business is one-dimensional i.e. ‘that strategy didn’t work, so let’s throw it out and do something else’. Instead, change needs to be incremental and responsive.
If you know your ultimate direction, your strategy has been well pressure tested and you’ve decided to make the investment, then don’t be too impulsive.
Time in the market – if you’ve done your homework – will eventually get the result. It might not be the exact result you’re after, but you can then consider and refine, test, change and implement again.
If you would like advice to help drive success in your business in 2024 – and beyond – contact the team at JPAbusiness on 02 6360 0360 or 02 9893 1803 for a confidential, obligation-free discussion.