I often read about businesses that don’t last the distance – businesses that look like they have great potential but just somehow can’t be sustained. I can’t help but think that many of these organisations mustn’t give any thought to “future proofing” their business.

So what is “future proofing” and why can it help businesses survive?

The literal definition of future proofing is: the process of anticipating the future and developing methods of minimising the effects of shocks and stresses of future events. Sounds a lot like planning doesn’t it? You’ll also note the significance of the word “process”. This suggests that future proofing is not about one-off gimmicks or quick fixes – it is a course of action, an ongoing function.

The definition also talks about minimising the effects of future shocks. So, here are my top four tips to future proof your business.

Tip 1: Get your business into a strong financial position.

If future proofing is about minimising the effects of future shocks, then the best way to do this is to have a “war chest”. Make sure that your business is profitable and has strong free cash flows. That means that if you lose a key customer you can withstand it better than if your business was operating on a “line ball” basis.

In a previous blog I talked about my top three ratios for business success. Profit, in and of itself, is not enough. It needs to be strong profit, with an acceptable level of return on capital employed (ROCE). However, profit is opinion, cash is fact. Just because you’re making a profit doesn’t mean the business has free cash flow.

Your business may be growing so fast that all of your free cash flow is injected back into the business. This is how businesses go broke unless they have an unlimited source of money from outside the business, which is rarely the case. Once again, I recommend that you refer to my blog, Three reasons businesses don’t have cash, for more information on this area.

Tip 2: Have a structured process.

As the definition of future proofing suggested, you need to have a process. One off, uncoordinated attempts at “quick fixes” will not do it.

An approach that I use is “now, where, how”. Not rocket science, but effective. The process starts with assessing the “now” or current reality for the business. Unless we understand where we are we can’t move on. We use a number of processes to assist in this. These include a strategic SWOT analysis, which not only looks at the strengths, weaknesses, opportunities and threats of a business, but also builds strategies on, for example, how we can use our strengths to capitalise on our opportunities.

Next, we need to understand “where” we want to go before we get into ‘solution mode’. As the saying goes – if you don’t know where you’re going, any road will get you there. Again, having set processes to assist in developing the vision can be helpful. It is also important to understand the ‘raison d’etre’ for the business.

Tip 3: Develop an action plan

One of the biggest failings I see in planning processes is the lack of an action plan, with timelines and responsibilities allocated to specific people – who has to do what, by when. Many businesses run planning workshops. Everyone walks out of the workshop hyped up and raring to go but there is no action plan and therefore no accountability. Strategy without action is only a daydream.

Tip 4: Don’t fail to implement (FTI)

with an action plan, we all get tied up in the day to day operations of our business working in the business, not working on it. The result can often be that the action plan doesn’t end up getting implemented.

To ensure that this doesn’t happen, my process is to meet with the management team of the business on a monthly basis to ensure that the action plans are being implemented. An external facilitator can “turn up the heat” when the hard decisions have to be made, but also act as an impartial party to provide an external focus for the business.

Every business owner should have a specific strategy in order to push the business to greater success.

The plan itself must be a living document that can be easily massaged and adapted as time passes. External factors such as fluctuating economic conditions and consumer trends mean that this plan has to be agile but the essence should remain true to your main goals.

An important part of the strategic plan will be the budgets. It is essential that you structure your financial reporting in a manner that enables you to review all aspects of the business. Having a chart of accounts that logically separates the business into its important divisions and components is a good start.

Your financial results should be reviewed regularly (monthly is recommended) and comparisons made to budgets. Any significant variations should be investigated and the impact on future results assessed. For example, you may have planned to achieve a particular gross profit margin and as a result of your regular monitoring, you find that it is not being achieved. Your research reveals that there is a new competitor in the market that has made it necessary for you to reduce prices in order to remain competitive.

A significant change of this nature should prompt you to review your long-term strategic plan so that you can investigate whether there are other avenues open to you to introduce new products, or seek better buying prices from your suppliers and other options that will enable you to achieve the desired profitability included in your strategic plan.

If you find that it will be difficult to achieve your strategic planning goals you should undertake a thorough review of all business costs and strategies to ensure that your goals can be achieved.

You must keep yourself informed of business trends, new products and new technologies that will have an influence on how your business performs. It is important not to act as a lone wolf, but rather ensure that you are meeting and mixing with similar minded business people. Learning from your peers can greatly improve your business achievements. You might consider joining an industry association and becoming actively involved. In addition, subscribing to online forums and publications can assist in keeping you up to date and ahead of the pack.

And don’t forget that your accountants can be a great source of business knowledge. Having regular interactions with them will ensure that they know what you are doing and are therefore able to assist you

How often do you walk into a business and see a vision or mission statement on the wall?

Usually, the statement comprises anywhere from a few words to a few paragraphs. In my view, the longer the vision statement the less meaningful it becomes. After all, what is the purpose of a vision statement? Two significant uses are to guide strategy and inform stakeholders.

If the vision statement is so long that stakeholders can’t remember it, then what use is it? Similarly, if it is long enough that it is confusing, then it doesn’t assist in guiding strategy. In my opinion, the best vision statements are short (the shorter the better), but powerful.

A vision statement should be aspirational.

It is a one sentence statement (preferably a few words) that describes the long-term change arising from the company’s work. Oxfam’s vision statement as a great example – a just world without poverty. Will Oxfam every achieve this? Probably not, but as I said – the vision statement is aspirational. It is also sufficiently clear and succinct such that they will certainly know once they’ve achieved their vision.

The vision statement for the Multiple Sclerosis Society is equally as powerful – a world free of MS. Short, but extremely powerful. Stakeholders with the Multiple Sclerosis Society have no doubt where that organisation is headed.

What is your “perfect world” for the business? What would this look like? Microsoft’s original vision statement was something like – “a computer on every desk and in every home”. There would have been absolutely no doubt about the strategic objective of Microsoft at that time.

So, in summary, drill the vision statement down to no more than one sentence, but preferably just a few words. The shorter it is, the more powerful and compelling it becomes and the easier it is for your people can get behind it.

There is also a lot of confusion between a mission (or purpose) statement and a vision statement.

Personally, I prefer not to use the term mission statement but purpose statement. I feel this correctly describes what the statement is – why does the business exist? What is its purpose? Its purpose is not to make a profit for the owners. That is a result, or an outcome. What needs or problems does the business solve for its customers and what is the emotional benefit for the customer?

For mine, understanding the company’s purpose is a crucial first step in order to “inform” the vision statement.