HOW TO RETHINK YOUR BUSINESS SO YOU CAN SURVIVE AND THRIVE
As UK entrepreneurs learn to live with COVID-19, they have had to cope with storms, ‘the worst since records began’, supply chain disruption, increasing inflation (now running into double figures), rising interest rates, plus geo political uncertainty caused by the ongoing conflict in Ukraine.
The reality is that we live in an era where events continue to arise that will challenge even the most resilient of businesses and now, more than ever, it’s vital that entrepreneurs recognise and adapt to those challenges.
But our research shows that many businesses have not stopped to reflect on lessons from the last two years, and in fact there are signs of organisational stretch where leadership teams and the business are pulling apart, and many areas of good practice are being neglected.
So, what do we know and what have we learnt from recent events?
1. Many businesses have come out of COVID-19 restrictions with an appetite for ambitious growth. Many have entered new markets or found new ways of working in the last two years, but not many have considered if any old products or ways of working need to cease. This can create organisational strain as the new business is layered onto existing resources.
2. Many businesses have emerged having focused on what they know internally, with little research into competition, shifting demographic changes or exploring customer needs. This failure to understand market dynamics can lead to significant business threats.
3. High energy costs and wage inflation means eroding margins and could potentially also lead to customers rethinking their markets and suppliers. Increasing salaries and a buoyant employment market might mean the ‘Great Resignation’ is further accelerated, and lead to employers having to award higher pay increases to protect talent unless they can be creative. The good news is many are looking for purpose in their role and not just package and therefore businesses with a strong ESG proposition can attract and retain talent.
4. There has been a shift in cash reserves in many businesses, with liquidity being maintained through COVID-19 measures such as CBILS and VAT deferral schemes. Many of these reliefs now need repayment and cash reserves have in effect been replaced by debt. With little protection now available for businesses, this poses a significant credit risk.
5. Supply chains remain strained leading to stock outs, customer dissatisfaction, tied up working capital and quality risk. The need to near-shore or find more reliable supply sources is key but can also lead to loss of customers as they assess their options.
6. The Russian invasion of Ukraine adds to the above challenges with further acceleration of inflation and disruption to supplies. There is also the impact on consumer confidence and consumption as people brace themselves for what might happen.
7. The economic cost of COVID-19 measures also needs to be considered – as the government will need to find revenue to pay back the unprecedented spending on furlough, help to buy, underwritten loans, cost of care and so on. Many will question how the tax regime may be adapted to help generate tax receipts for the re-payment plan.
8. Sustainability continues to grow in importance amongst business leaders, their boards, investors, and customers – with many entrepreneurs looking to achieve Net
Zero in the short to medium term. The cost of achieving this should be considered in almost all decisions made with regards to the strategic direction of the business.
The list above, by no means exhaustive, shows the challenging environment businesses now operate in. It’s easy to say ‘good’ business will always succeed, but unfortunately that isn’t the case.
What is true is that the most important first step a business owner can take is to objectively look across the entirety of their business (i.e., their people, processes, profit, performance, productivity, place and most importantly, purpose) and identify weaknesses and barriers to growth. This 7Ps approach, designed by BDO, is a useful tool to help business owners think wider and look across all areas of their organisation.
Doing this alongside your team will help reconnect the different parts of your business, identify areas of alignment and allow you to pull together to achieve your desired goals.
BENCHMARKING YOUR BUSINESS FOR SUCCESS
If your business would benefit from support on any of the areas mentioned above, our free diagnostic tool helps explore your business’ performance under these themes and help you identify gaps
TAKE THE DIAGNOSTIC
From our diagnostic data to date, we can see that many businesses are failing to effectively convert their vision into a strategy, and that a high number do not fully understand the risks in their business.
Entrepreneurs need to take the time now to ensure everyone in their business, from the reception to the board, are aligned and bought into the strategic direction of the business. With this, comes resilience for the future.