How do good businesses weather the storm?

In light of recent upheaval in the financial markets, we have been approached by numerous clients, business owners and investors asking for our insights on what’s happening and what our outlook is. We are happy to share our observations but do note that we are not acting as financial advisors, and please do your own research.?

Some frequently asked questions are:

• What are the keys to a successful business that will weather the storm?
• What sectors are safer for investors?
• How do good businesses deal with the inflationary environment?

Whilst we are not economists or financial advisors, we have been in business for a long time, and spend a lot of time engaging with professionals and investors.

We do not profess to know what businesses or stocks you should invest in, but in times like this, we like defensive businesses - consumer staples, utilities, infrastructure, and essential services. Demand from investors and business owners for such businesses remain high.?

The key to success in any business is focus and execution. This is also why some businesses in underperforming sectors can also do well. Despite challenging macroeconomic factors, they can still excel. When we evaluate businesses, we look for a strong team focused on a common goal.??A hands-on business owner at the helm increases the chances of success. A focused team will not be distracted by new ideas every month.

What’s sometimes forgotten is that cash is the lifeblood of the firm, and the focus of a business must be to preserve cashflow.??A business can be profitable, and yet be cashflow negative. A good business will collect debts on time, and be able to pass on price increases to customers.?

During these turbulent times, old-fashioned ways of managing a business, focus and execution, is critical to success and survival.??