How to make sure your business remains profitable

Some parts of the economy, such as the dental industry, experienced boom times during the pandemic but they face new challenges as consumer spending habits return to normal.

The Queensland dental industry experienced boom times from June 2020 to October 2021. Picture: iStock.

The beginning of a new year has sparked a change in consumer behaviours, making now the perfect time to build your business pipeline.

As borders open, we are seeing consumer flexibility return, empowering people to choose where and how they spend their money.

This flexibility has resulted in a drop in demand with many businesses no longer experiencing the same record highs in terms of profits.

As revenues flatten, owners who haven’t considered the rising labour and supply costs, as well as vaccination impacts on their business, may experience a hit in their bottom line.

The Queensland dental industry experienced boom times during the pandemic.

An example of this changing consumer behaviour is the Covid-19 pandemic dental boom, with the Queensland dental industry experiencing its most profitable period on record from June 2020 to October 2021.

With restrictions in place and more cash in the economy, patient spending on major dental treatments was at an all-time high.

Patients were undergoing procedures they would traditionally put off. As a result, we saw practices performing well with many not deterred by rising operating costs.

This mentality is now shifting. We are seeing consumers return to their traditional spending habits and choosing to defer these larger dental costs.

So how do you make sure your business remains profitable? The key to staying profitable is planning. Cash flow projections and budgeting for the next six to 12 months will be vital to ensure the right cash reserves are in place to foresee potential impacts to profitability and/or, at what point the business may be at risk.

BDO business services partner Bhupesh Kaphle.

Planning is even more critical as government assistance for small businesses continues to decline especially in comparison to what was available at the peak of the pandemic.

It’s essential that business owners use current and relevant data for all budgeting and planning.

A common business mistake is to immediately offset rising operational costs with an increase in prices. We suggest acting with caution here, pausing to consider if price rises are sustainable for the consumer and if the market is ready for these changes.

Acting too swiftly may result in a further drop in demand as consumers continue to flex their muscles when it comes to spending discretion.

Lastly, consider the impact that resourcing and capacity issues will have on your business as labour trends arise on the back of COVID-19 vaccination regulations.

For those experiencing staffing issues, owners need to ensure that ‘high end’/big ticket work is prioritised.

Bhupesh Kaphle is a business services partner based in Brisbane at accounting and advisory firm BDO