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There’s a very good chance that you’ve been talking about resilience in and around your business and there is a good reason why. In a 2016 survey, Control Risks explained business resilience as “an organization being able to identify, analyze, and implement planning to be better able to recover or ‘bounce back’ from disruptive events”.
Many business and managerial practices have proven that a focus on resilience is increasingly important to ‘bounce back from disruptive events’, such as a global pandemic. In this article we share insight on the following:
- What is resilience?
- How do you manage and measure it?
- How do you build a more resilient business?
Related: Increasing Your Business’s Resilience to Come Back Stronger
What is resilience?
Business resilience can be defined as an organization’s ability to predict, plan, react, and adjust to changes and disruptions in the business environment. If a company can effectively develop its resilience, it can eventually secure its ability to accomplish its goals and objectives, regardless of the unpredictable events and changes taking place.
How do you manage and measure resilience?
Traditional management methods have some significant drawbacks that make it difficult to assess and achieve resilience:
- Many conventional companies have been designed to increase shareholder value from dividends and share value. Very few organizations really aim to calculate resilience beyond particular material threats.
- Companies and shareholders also concentrate on optimizing their short-term returns. However, resilience requires a multi-time perspective: to forgo a certain amount of productivity or success now for the sake of more sustained performance in the future.
- Businesses have focused primarily on designing and implementing stable strategies that perform well when the causal relationship is simple, predictable, and unchanging. Resilience deals with what is uncertain, changeable, unpredictable – which although can have serious implications.
Managing resilience requires more than just coming up with new ideas or resources to apply to today’s approaches. It needs a different business model – one that embraces complexity, uncertainty, interdependence, systems thinking, and a multi-time scale perspective.
Related: How to write the perfect business plan
How do you build a more resilient business?
There are 3 major areas through which resilience can be enhanced:
Leadership and strategy – Building a resilience vision starts with the identification and awareness of vulnerabilities and an overview of the possible effects of these vulnerabilities on the business.
Operations – Operational resilience can be improved by recognizing possible crises that might affect the business and rating these threats against the effect they will have and then implementing a risk reduction and management plan.
People – Employees and their expertise are essential to the organization’s resilience. Investing in the workforce is the only path forward. Ability levels, turnover of workers, work satisfaction, training, and learning opportunities should be closely controlled. Ensuring that people are involved in the change program, and keeping them motivated, will yield rewards for every business.
Let’s not forget, many businesses already take on some form of risk management but mostly to understand the effects of specific, known risks. Your business’s resilience should also be to deal with unknown risks, be able to adapt and change any external stress, and possibly turn it into an opportunity to succeed.
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Having an effective cash flow system is the heartbeat of any successful business. This is especially true in a construction business where managing cash flow between different projects can mean the difference between success and failure of your business.
We’ve put together a few tips and tricks that can help you manage your cash flow to ensure your construction business remains profitable across all projects.
Understand your customer
As a business owner, it is always ideal to work with contractors and customers who know how to process your paperwork, provide approval on work completed, and pay for services soon after completion. Knowing your customer’s creditworthiness by reviewing their financial statements or annual fiscal reports can help you understand how they have worked in the past and guide you on how to manage your relationship with them. It is important to know that they will be able to pay for the work you complete for them, even before you begin.
Do a Cash Flow Forecast
Create a reasonable cash flow forecast for each of your projects. Depending on the length of the project, plan out how much work will be completed each week or month and how much you can invoice for. Remember to consider how much you are set to pay vendors so you have an estimated idea of how much cash you will have at every stage during your project. At the end of each project, compare your forecast against your receipts so you can improve future forecasts and in turn better manage your cash flow.
The Best Bridging Finance for SMEs
Be realistic about your profitable estimate
You should never consider taking on a construction project that will not be profitable for your business. Managing your cash flow on profitable projects is difficult enough. You always have to avoid moving funds from one project to pay for another just to keep an unprofitable project going.
Negotiate contract terms in your favour
It is important to ensure that the payment terms you agree on are in your company’s best interest. The invoicing schedule you should prefer is one that reflects upfront costs that set the project in motion, such as being paid for materials when they are delivered rather than when they have been installed. Come up with a schedule that works for you and your vendors so both parties have an understanding and you can avoid having disputes about money and payment terms throughout the project.
Always check Change Orders
Change orders can have a big impact on your cash flow so it’s important to know what you can and can’t charge for. Change orders should be clearly established in the contract. Keeping on top of and documenting the extra work completed is essential.
Be strict about collecting payments
It is always good to have your accounts receivable down to 40 days or less, however, this may not always be the case. When invoicing customers, ensure you have all the correct and necessary documentation and that you are submitting to the relevant people so you can avoid delayed payments. Do not be shy when requesting payment against an agreed contract.
3 Ways Bridging Finance Instantly Improves Cash Flow for Your Business
Close the Project
Closing a project and collecting payment can be tricky at times. Effectively managing the final punch list can improve the timeliness of the final payment. With the help of Lulapay, you can collect payments upfront and we can offer your debtors payment terms with us. Read more about how this works here.
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In the face of COVID-19 most businesses have already been taking some steps, out of pure necessity, to increase their resilience.
However, as we settle into the uncertainty and prolonged semi-locked down period, we thought we would highlight the areas most experts agree should be prioritised to increase business resilience.
In this instance we define resilience as the ability to come out of a crisis faster and stronger than competitors in your industry.
In terms of survival over the lock down period many businesses have already made use of Cost cutting, and while most owners are good negotiators, we tend to get lax in times of plenty. We must use the memory of COVID-19 to keep us on our toes in terms of how we spend our budgets, how often we choose to negotiate and how extravagant we are in times of plenty. In addition, as seen in this McKinsey study of 2000 businesses, in times of crises an early and strong focus on cost cutting can better position your business for an earlier and stronger recovery. It is worth noting that in this instance the best form of cost cutting is increased efficiency through greater digitisation.
In addition to this, business insurance, as we have all seen, is worth the investment. So too is staying on top of things like UIF and encouraging your employees to invest in income protection. It is far too easy to underestimate how often these big crises occur, but once a decade is a good benchmark (last decade there were two – 2002, and 2008).
This leads to the next level of resilience – building up savings or having access to funds that can see you through any prolonged period of reduced income. On a personal level we are told to build first 3 and then 6 months worth of savings as an income buffer – and it shouldn’t be any different for your business.
While you are building this buffer up, and indeed after, it is worth having additional funding options in place. Fast access to funding allows you to fill any gaps, or more importantly to take advantage of opportunities to grow your business and recover faster ( Lulalend’s instant access credit facility is designed to help support your business through good times and bad. It has no fixed fees so it costs you nothing to have it in place “just in case”).
Throughout the current crisis we’ve all felt there was a lot of noise, but few quality sources of information. Did you manage to discover the right source of business information. If not, it is worth making sure that you have a good, reliable source of information so that you don’t waste time trying to find the answers you need. This allows you to take action faster and keep your focus where it is most needed.
One area that can help with this is finding a good mentor or building a strong network. Simply looking for businesses in your industry either locally or internationally and sending out a request to ask for some guidance can be the beginning of increased support and insights.
What is clear from the McKinsey study is that the most resilient businesses act faster to recover faster, especially as opportunities begin to present themselves as the markets change, and as competitors begin to offload assets. Furthermore the gains they make during this time stand them in good stead for years to come.
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What is Yodlee?
Yodlee is a leading data aggregation and data analytics platform powering dynamic, cloud-based innovation for digital financial services. This advanced technology makes it easy for clients to upload documents, knowing that their information is protected.
How does Yodlee work?
Yodlee collects data on Lulalend’s site through screen scraping: a technique which collects data and sorts them into categories. After entering the details into Lulalend’s site, it gets encrypted from that point, to ensure that your details cannot be viewed by third parties. Your credentials are securely stored on Yodlee’s system and cannot be accessed by Lulalend
I don’t trust Yodlee, can I send you my bank statements?
Yodlee is trusted and used by many major companies such as PayPal, Amazon and many global banks. We use it to get a read-only view of your bank transactional history. This allows us to process your application automatically, avoiding time consuming validations that are required for uploaded bank statements. Yodlee is totally secure and your bank credentials are never viewed or stored by us. Alternatively, you can upload your latest 3 months formal bank statements (Please be advised that scanned copies do not help much as it does not allow us to extract the data automatically).
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Depending on the business you are in Christmas can be a quiet or chaotic time of the year. Sales either plummet or soar but each comes with its own challenges.
Retailers, for example, walk a tightrope with cash flow. Constantly trying to manage supply and demand so that you don’t run out of stock or lose money overcompensating on stock that expires or becomes dated. This can significantly wound your business before you’ve even started the new year.
It’s no different for the likes of construction, or any other very seasonal business. The slowing down over the festive season can leave businesses with too little working capital, but still with salaries and bonuses to pay.
No matter your business, these festive Christmas tips might help ease the struggles now and in the future.
1.Consider your budget throughout the year
Always keep in mind that this time of year presents certain challenges that aren’t the same as other months. Make room for this in your budget and calculate what you need to make December a more profitable time of year. Plan campaigns or specials – make sure you’ve put this money aside for them as well as for other costs and expenditures so that you don’t need to grasp at straws come December.
2. People get paid early and are managing cash flow too
Don’t be unaware that your customers are struggling with the same cash flow problems on a personal level. This means they are also looking for ways to make it through the month while still enjoying the holidays. How can you help them solve this problem?
3. Partner with another business
Using your network is always a powerful thing. Take advantage of partnerships where you can offer multiple products or services if customers take advantage at either business. The agreement between partners needs some consideration but there are many ways that you can mutually benefit from one another and support one another. For example, some stores give you extra items from partners to make the purchase more compelling. Or they give you a voucher for another business that you can get a discount on. Some partners combine a joint campaign with media budgets to make sure they boost sales for both partners often at half the spend. The possibilities are endless and you need to identify what works for your business.
4. Pair charitable acts or donations with sales
Tis the season to be jolly, but it is also the season of giving. People are more inclined to do good and contribute to a worthy cause this time of the year. Something about Christmas seems to bring people together and open hearts a little wider. Your business can help underprivileged organizations and the more vulnerable, build brand awareness, and generate sales. For example, some people offer a buy xyz and we’ll donate one/donate a percentage of the purchase towards [insert charity of your choice]. Do good this season and help your customers do the same.
5. Remember it’s Christmas and the holidays
Don’t forget what this time of year represents by getting bogged down in the details. People are relaxing, most people are in good spirits, and they want to take a break from the responsibilities of the home/office. They dust the year off and get ready for a fresh start. Let your business acknowledge that – whether it’s through decorations and getting into the holiday spirit as a business or incorporating that into your offerings. Be part of the festive cheer, your customers and employees will appreciate it.
You should take time yourself to step back and review how your business has grown in the past year and to plan 2019. But not before taking a well deserved moment to enjoy the festivities yourself. Sometimes taking a break is the exactly what leads to the break-through you need.
We know these are great tips, but the reality is often very different. Circumstances are different for each business too. So, for times like these, you still have Lulalend. We know the ‘nice to haves’ for your business aren’t always attainable. But we work with you to make them attainable one day.
That’s why we offer business funding to fill all the gaps or to take advantage of opportunities. We know seasonally you need finance for cash flow and working capital immediately – that’s why we help you get the funding in hours. We know you don’t have time for the reams of paperwork so we don’t require it, and we know running a business isn’t cheap – so we give you access to up to R1 Million for you to use as you need not as the type of funding dictates.
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Running and managing your own business can be one of the most rewarding but exhausting and challenging situations you will find yourself in. It involves making the tough decisions. It almost always involves failure before success is seen. It requires sacrifices that not everyone is willing to make, and often things like small business funding are difficult to get easy access to or come by at all.
Richard Branson said, “If you want to be in business 10 years down the line, you must have a deep understanding of your business, the market it operates in and a great team to support.”
If you don’t believe this, below is a long list of his successes and a few pointers on how to grow your business from the guy who is estimated to have a net worth of approximately £2.58 billion (US$4.2 billion), ranks 254 in the global list of billionaires and is the 5th richest person in the United Kingdom.
Richard Branson’s long list of successes:
Plan for the long term
“Mapping the risks and opportunities for your business early on can make all the difference. Setting some milestones for you and your team to work towards will keep you motivated and driven. There will be obstacles to growth you cannot foresee but having a roadmap in place from the get-go will help build structure and focus to decision-making.”
Stick to your founding principles
“Investing in your people and delegating out responsibility is another key ingredient to building a successful business. I learnt this from a very young age. There is little point recruiting great people if you don’t then give them the autonomy to take their role and run with it. It also frees you up as the founder to focus less on the day-to-day activities and more on the over-arching objectives laid out in your ten year roadmap.”
Get the right support
“From my experience the key to long-term growth is much more than just raising enough funds. You need support and mentoring from those who have been there and done it themselves, teaching you how best to use the funds and help you avoid any mistakes they may have made. I myself benefited hugely from the words of Sir Freddie Laker when starting Virgin Atlantic. He told me I could never compete with the big advertising budgets of the large airlines and would have to get out there and use myself to promote Virgin Atlantic.”
If you’re planning for the future and need the right support when it comes to small business financing Lulalend offers a quick, easy solution. We care for small businesses and want the words of Richard Branson to ring true for your business.
To help you plan for the long term we offer the support through business finance. The great news is our application process has 3 quick steps which are all done online. We offer small business funding up to R500 000, have no hidden fees, competitive fixed costs, and you can see the money in your account in 24 hours. We aim to take one of the most challenging hurdles out of the way – access to funding – so that your business doesn’t have to be open to the many failures that it’s can come up against.