Business Matters – Issue 32
Create a robust business model | Model cash flows | Make it ‘quality’ growth | Manage your risks | Stress test your strategy
Power-up your leadership team | Focus on your employee well-being
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Resilience redefined: 7 ways to strengthen your business
It’s natural to focus on growing your business footprint and profits, but don’t neglect boosting your resilience, as this will help you capitalise on new opportunities once the current economic volatility settles.
2023 was a bumpy year for businesses, with the UK experiencing a brush with recession and seeing soaring interest and inflation rates. Amid the turbulent conditions, entrepreneurs are seeking ways to help them withstand the challenges.
Although cash flow is king, resilience is about so much more than putting prices up. Indeed, the government recently revealed that 52% of trading businesses were not considering raising prices in November 2023 – the highest proportion to report this for over a year.1
What’s more, resilience doesn’t just help during periods of adversity. Agile companies are well placed to scale or expand into new markets, drive more robust marketing strategies or exploit any new gaps in the market.
So, while business owners are hopeful for a brighter future, don’t be afraid to pivot your plans if you need to. Here, we break down seven ways to improve business resilience.
- Create a robust business model
Create a comprehensive business strategy that covers every facet of your company, encompassing the ‘what’, the ‘why’ and the ‘when’.
Review your current plan and make sure it defines your strategic goals – including where you want to take the business over the next 12 and 36 months. This involves conducting a SWOT analysis to assess your Strengths, Weaknesses, Opportunities and Threats. Furthermore, examine the factors driving your revenue, identify your core competencies and pinpoint areas where collaborating with external partners could aid in achieving these objectives.
Ask yourself: have your products and services achieved market fit, and can you make and supply them in time and for a reasonable cost long term? Have you priced them in a way that ensures consistent profits? Do you rely heavily on one product, service, customer segment or supplier? Could you improve your organisation’s resilience to adverse events by diversifying?
- Model cash flows
The next stage is to create business-intelligence and key-performance-indicator dashboards to gain insights from your financial reports and determine the appropriate actions to take if needed. Running out of cash is one of the main reasons businesses fail. This could be caused by growing too quickly, selling too much, running out of cash before payments arrive or spending working capital on projects such as new product initiatives.
To counter this, set sustainable growth targets. Use rolling 13-month cash-flow forecasts, updated at least monthly, to help ensure you never run out. Track exactly what return you’re expecting and how you will achieve it. Agreeing those parameters in advance allows you to ensure you don’t overextend yourself.
Try to be realistic about what new projects you can start in the coming year and over the next three years, then build them into your business plan and strategy. If a better opportunity arises down the line, you can adapt and reallocate budgets. Proactively plan and manage product lifecycles through phases of introduction, ramping up, maturity, decline and upgrade or replacement.
- Make it ‘quality’ growth
Scaling your business is another crucial way to become resilient, but remember that in modern business, it’s no longer about growth at all costs – it’s about efficient, good-quality growth.
Although profitability is undoubtedly a measure of success, companies must improve the elements that make up corporate ‘quality’ and long-term sustainability.
While healthy levels of cash flow are important, so are agility, innovation, intellectual property and staff retention. ‘Quality’ is also about building long-term value in a structured way through better systems and processes, and mixing revenue streams to avoid over-reliance on one type of customer or product.
And don’t forget environmental, social and governance (ESG) factors. For example, are you working towards carbon neutrality and reducing waste? Are you improving your social impact through community and charity projects? Does your business have strong governance processes?