It’s one of the most famous movie scenes of all times.
During Ben Braddock’s graduation party, a family friend takes him aside, and gives him a friendly piece of career advice…
“I want to say one word to you. Just one word… Are you listening?”
“Yes sir.”
“Plastics.”
Had they been filming The Graduate today, Mr McGuire may well have offered Benjamin a completely different word – “PPE”.
After all, there are few industries which have seen such explosive growth in recent months.
Thanks to Coronavirus, not only has a brand-new market for PPE opened up for individual consumers, but care homes, hospitals and other organisations which have always required PPE have seen demand soaring.
A recent Fortune Business Insights report projected that the global market for PPE will skyrocket from $52.43 billion in 2019 to $92.86 billion by 2027.
So if you were in the PPE business you would probably feel pretty excited and confident right now. Your financial future seems assured!
But is that justified?
After all, any number of developments could change the outlook for PPE.
Scientists could develop a Coronavirus vaccine…
The second wave could not materialise, causing a sharp dip in demand…
Or the public may simply change its approach to risk, with large numbers of people deciding they prefer walking around without masks or protective gear, despite the continued threat of the pandemic.
If back in July 2020 you had blithely assumed that your impressive growth was going to continue forever, you might be bitterly regretting your naiveté, as you struggle to get rid of excess stock, pay all your new staff and honour agreements you made with suppliers.
PPE is not the only industry that risks over-confidence right now.
As I said last week, the press and government are – understandably – very much focused now on businesses that are in trouble because of the pandemic. But there are also a large number of companies which are doing rather well in current conditions.
Yours may be amongst them.
If your sales are healthier than ever (and doesn’t that feel great!), you have to manage that growth carefully, making sure that everything is in place to handle all this new demand.
Most importantly, you need good financial management, so you don’t run out of money trying to serve all these new customers (a classic and common error).
But equally, a good financial plan will ask difficult questions…
Namely, what if your company starts to shrink again?
For example, what if your customers suddenly don’t feel comfortable spending money because of a change in the economy or in the pandemic conditions?
What if the product that was in demand today is suddenly not deemed necessary tomorrow (like all those mats people bought encouraging a 2m distance…)?
What if some of the surge you’ve seen was simply demand that would have occurred later in the year under normal conditions… And now that won’t happen?
What if the economy takes a significant dive?
Or what if you don’t have the finances or infrastructure to serve all these new customers smoothly and successfully – and either they start abandoning you, or you take a deliberate decision to slow down for your own sanity?
You cannot assume that today’s growth will continue tomorrow.
We are living in particularly volatile and unpredictable times. Simply surviving the shut-down – and even growing at this difficult time – is no guarantee that you’ll continue to thrive 6, 12 or 24 months down the line.
And you need a financial plan in place, in case of a reversal in fortunes.
It doesn’t have to be extremely detailed, because the future is difficult to predict…
…But if you’re going to be responsible and manage your company in a grown-up way, you need to at least think about the issues involved and how you might handle a slowdown…
…Because the financial repercussions, if that happens, can be very difficult to deal with.
A slowdown is never easy to manage, but coming on the back of a period of high growth, it could be even more challenging than usual.
In corporates, the finance director puts together financial plans both for good times and for bad, so they never have to act in panic. There is always somewhere to start from – that’s one of the reasons they have a competitive advantage!
And it’s part of what we can do for you, too.
If you’re growing nicely right now, don’t get complacent. Good financial management is more important than ever.
Just email or call us on 01279 647 447 to get in touch today, and discuss how we can help you professionalise the way you manage your financial affairs.
Because if I could give you one real word of advice for the future, it wouldn’t be anything like ‘plastics’ or ‘PPE’… It would be ‘Planning’ – the key to financial success, no matter what industry you’re in.
