Business success in the 2022 financial year is going to come a lot easier than the 2021 financial year for many Australian businesses.
Australia has recovered its GDP to pre-pandemic levels and business confidence has returned in full force.
Here in Western Australia we recently recorded an astonishing 3% growth rate for the March quarter.
As the economy changes, businesses need to be prepared for what is coming.
As business owners, we get very caught up in the busy daily cycle of running a business. But we need to also keep our minds oriented towards the big picture – whether that is in our business, or what is going on in the economy.
1. Do a budget
Your budget sets the foundation for your business over the year.
It’s critical to understand how your business model is going to work over the next year.
Given we’ve got a changing business environment, your budget may need updating throughout the year.
What is key is that you have a budget in the first place and that you regularly evaluate how it’s going.
2. Be cautious about overspending in a boom
Given the boom I suspect business in 2022 will involve a lot of spending.
One of the items that is key to a budget is your capital expenditure.
Given the booming economic conditions in most of Australia, your business is likely expanding.
In such a positive environment many business owners may be inclined to overspend.
Be mindful that we have boom and bust cycles, especially here in Western Australia, so be cautious with your capital expenditure.
3. Make sure you have clear terms to get paid
Other businesses will also be subject to the risks of overspending in a boom.
Many businesses will be trying to take advantage of the economic upswing.
Some of them will be successful, and others might overcommit.
Businesses that overcommit their spending could end up owing you money and having issues paying it.
It is critical that you prepare for this.
Make sure your terms and conditions guarantee you get paid and that you include PPS registration.
If you would like to learn more about ensuring you get paid, read our article here.
4. Review your gross profit margin in a boom
We are in an economy where your services might be in higher demand than they have been, possible the highest in a decade.
That means you need to review your profit margins.
If you’re absolutely swamped with work, as many of our clients are right now, one way of reducing the overload is by putting the prices up a little bit.
This will mean you make more money and you’ll be less overloaded.
Sometimes the smart option is to make more money from gross profit rather than by focusing solely on growing your business.
If you’d like to learn more about how to improve your gross profit, read our article here.I’m interested in business help