Ross Greenwood: Budget shocks will test small business managers

This week external change will hit a variety of businesses after the Federal Budget is handed down. Some will adapt and move on; others may succumb.

Businesses must be prepared to adapt to all kinds of external change.

This week external change will hit a variety of businesses after the Federal Budget is handed down. Some will adapt and move on; others may succumb.

One of the most valuable lessons I learned years ago is that business is never constant: it always grows or shrinks.

Good managers anticipate change, and plan for it. This goes to something as simple as the size of your office or factory. If a big order comes in, the space will quickly be too small and you will be looking for new premises, which takes time and money. But if you lose business, or you don’t grow as quickly as you expect, you will be paying for space you don’t need.

The same goes for staff. In an ideal world, your staff will always productive, never idle. Yet if business slows then quick action is needed to assess how long the downturn will last and whether employee numbers should be cut. Conversely, if things pick up suddenly finding workers who understand your business and who are ready to go can be as big a challenge.

This is why so many businesses seek one of two different models in their planning. Many will try to be as flexible as possible, with staff, space and costs. That way you can manage the peaks and troughs in your cash flow as business comes and goes. But it means using more agency or casual staff, or using short-term office rentals as a core-part of the business strategy. Many start-ups use these ideas to get themselves going.

But as contracts start to roll through the door, business becomes more certain. The result is more full-time staff and more fixed assets including offices, factories, plant, machinery and equipment. As the business and staff grows, bookkeepers, payroll staff and perhaps eventually Human Resources people will become part of the operation.

By then the business-owner who started out with an idea will have to make a decision whether they’re the best person to manage the staff and administration, or whether they trust themselves (and others) enough to outsource it.

This, not surprising, is one of those pinch points in the history of any business. The owners who solve the problem of growth are those who often go on to greater success.

Poor administrators who refuse to give up control can often find themselves vulnerable to external shocks — such as those that will inevitably come from the Budget.

Originally published as Ross Greenwood: Budget shocks will test small business managers