We are living in a period of uncertainty for UK business as the Brexit process unfolds. We are watching messaging, posturing and policy change daily through the seemingly endless media speculation. This pattern is unlikely to change any time soon and it would be a brave person who was prepared to gamble on exactly where it will all end up over the coming years.
The latest Government statistics show that 48% of people work for Micro and Small businesses (0 to 49 employees) and these same businesses produce 33% of total turnover and represent 99% of the total number of UK businesses. Uncertainty is always a major problem for all businesses but it is this sector that is potentially most exposed and least able to respond.
How do you prepare your business to survive & thrive under uncertain conditions?
The most practical advice for SMEs from the UK Government is for them to focus on increasing their resilience so that they are best placed to take advantage of whatever the future holds. Easy to say but what does "increasing your businesses resilience" actually involve and where do you start?
What is business resilience and how do you improve yours?
A relevant definition of resilience is "capacity to anticipate and react to change, not only to survive, but also to grow". There are 8 key steps you can take to increase the resilience of your small business, see below:
1. Financial performance Having a clear plan supported by a budget with management processes in place to track performance indicators on a regular basis to stay on track. Particularly important to have leading as well as lagging indicators to maximise the "visible" horizon for your business.
2. Growth potential Structure your business to maximise scalability to support growth whether that is geographic (new territories), horizontal (new market sectors) or vertical (expand internal capacity).
3. Non-reliance Vital that you manage your exposure to customers, suppliers, manufacturers, distributors and partners etc. to ensure that you can trade on should they encounter any difficulties. A rule of thumb is to keep exposure to any one customer to less than 15%. Similar figures would apply to other external businesses you rely upon.
4. Cash flow Take care who you trade with, check credit worthiness. Have clear payment terms and conditions and minimise aged debtors. You should also m
anage stock levels as efficiently as possible, ideally having others hold stock on your behalf wherever possible.
5. Recurring revenue This is a key factor. If you can move your business up from a basic consumable business to one where most transactions are done on multi-year or annual contracts you greatly increase your ability to absorb change or uncertainty.
6. Wow factor The degree to which your business stands out from the crowd will have a significant impact. You should always be looking for ways to differentiate your business or better still identify and exploit niche markets.
7. Customer satisfaction This is a leading indicator of repeat business and a key point of difference. It is also much cheaper to retain (and up-sell to) existing customers than to acquire new ones.
8. Hub and spoke In many small businesses the owner is the hub around which the business operates. This arrangement limits growth and also exposes the business to risk should anything happens to the "hub". The key is to build a strong spirit of teamwork and provide effective leadership. This also provides opportunities to build engagement reducing absenteeism and increasing productivity.
If you can follow these 8 key steps, your small business will be well placed to weather whatever the future holds and take best advantage of the opportunities!