The Business Owner’s Guide to Surviving Uncertain Times

Contents

IntroductionThe Guide to Survival

Beyond Survival...

Welcome to the era of uncertainty Everything you need to guide your business through rough waters

Forming a balanced strategy for lasting success

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Introduction

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The Era of Uncertainty

We are in the midst of an era of uncertainty. The already slow recovery of the global economy since 2008/9 has been slowed further by recent political events, resulting in profound changes for many business owners.

The Federation of Small Businesses surveyed 1,035 firms between July and August 2016. The results showed that business confidence has fallen into negative territory for the first time since 2012, with pessimistic business owners outnumbering confident ones.

The threat of further recession is a constant during uncertain times, and for businesses to survive, they must become not only fully aware of the swirling currents that eddy around them, but to stay above water, they must relearn what it means to stay buoyant in today’s uncertain world.

The need for a robust, flexible and progressive strategy is essential to survival in such uncertain times. A Harvard Business Review of 4,700 public companies found that 17% percent of those companies did not survive a recession: they went bankrupt, were acquired, or became private.

And it’s not just about short term survival. About 80% of the companies in the study had not yet regained their pre-recession growth rates for sales and profits three years after a recession either, suggesting that despite surviving the uncertain times, the businesses were not properly configured for longer term success. This indicates the requirement for a strategy that takes both the short term implications of uncertainty (cost reduction, restructuring etc) and the longer term goals of growth and sustainability into account.

What are the Implications for Businesses?

Business owners and entrepreneurs confront ambiguity and change on a daily basis. The most successful are constantly alert to changes in their environment, and are carefully analyzing it for opportunity. However, a continued and sustained climate of macroeconomic uncertainty brings a more intense set of challenges.

With uncertainty comes many unknowns. Questions that business leaders can usually answer with some degree of confidence become more opaque and difficult to answer clearly: What new products should be introduced? Where and in what should investment be made? What new markets should be entered? Who should we be looking to hire? What’s the right price to charge / offer? Where should cost cutting be concentrated?

Surviving uncertainty means understanding the nature of your situation and proactively making the necessary assessments, adjustments, and enhancements to reconfigure your business. It means making the decisions required to develop the resilience, flexibility and competitive edge to ride through the rough waters and come out ahead, ready and aligned for when sailing becomes smooth.

“A wave of anxiety has been unleashed across organisations, markets and society. This reflects a “fear of not knowing”.”

- Ashridge Consulting Group

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The Survival Guide

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1. Follow economic developments

2. Practice good cash management

3. Keep a healthy working capital surplus

4. Reassess your business plans

5. Have contingency plans

6. Nourish and protect your customer base

7. Review and protect customer contracts

8. Spread customer concentration risk

9. Refine and protect your supply chain

10. Avoid trading solely on price

11. Look after your people

12. Consider outsourcing

13. Refocus your propositions

14. Protect or enhance your marketing

15. Get smart with business development

16. Re-examine your online presence

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What makes for a good strategy in highly uncertain business environments? How can businesses prepare themselves for anticipating and responding to what by their very nature are unanticipated events?

Strategic readiness through a combination of awareness, flexibility, strong navigational leadership, resilience, collaborative working, predictive learning, considered investment, innovation and agility.

If you are reading this guide, then perhaps you are feeling the pinch of uncertainty, and recognise the risk it brings to your business. Now is the time to act. Make the necessary adjustments to your business now to help prevent it becoming another statistic of an uncertain environment.

“Defending yesterday, that is, not innovating, is far more risky than making it to tomorrow.”

- Peter Drucker

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Now is not the time to bury your head in the sand and ignore the macroeconomic developments occurring around you. In order to construct and deliver a sound business strategy, you need to be fully aware of what wider issues may influence the performance of your market, your supply chain, and therefore your business.

Follow news channels, subscribe to thought leadership writers and thinkers, learn to recognise the signs of economic turbulence, and be sure that any management decisions are made in the context of the most up to date forecasts, trends and indicators.

Cash is the lifeblood of any business and managing it is vital to the well being of the organization. Managing cash inflows and outflows poorly, may result in a liquidity crisis in the face of uncertain or fluctuating circumstances.

Companies can improve their cash position just by making certain that invoicing, collections and payables are operating at maximum efficiency. Reduce the cash conversion cycle of your business by making sure that you invoice swiftly and accurately, collect efficiently and determinedly, and pay judiciously within the terms of your contracts.

Try to save cash reserves during periods of strong performance. Being in a healthy financial position allows you to make the right decisions for your business, in terms of client acquisition, supplier partnerships, investment, and recruitment – you should be in the position where you take on business, suppliers and staff because they’re the right fit for your brand and goals, rather than because you need to.

Investigate alternative financing options. You can expand your financing by establishing a line of credit that you may need further down the road. It doesn’t have to be used

Follow Economic Developments

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Practice Good Cash Management

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immediately, but knowing it’s in place and available when required will help you make smarter business decisions moving forward. Unsecured, revolving credit facilities are designed specifically for this purpose. Incorporate a carefully selected alternative finance product as a flexible part of your cash flow strategy.

Above all else, make sure you have enough cash in the business for when you need it. You can service your customers and debts while being loss-making for a while, but not if you run out of cash.

Review remuneration and dividend payments to make sure they remain reasonable given the specific circumstances of your business. With clear and honest communication, legitimate adjustments in the short term can be deemed acceptable, if not entirely palatable.

Defined as ‘the difference between current assets and liabilities’, working capital typically includes inventory, cash, accounts receivable and payable, and debt due within 12 months.

Running a healthy working capital surplus puts your business more in control. With more cash available for the benefit of the business, you can increase its competitiveness by offering supplier discounts due to prompt payment, optimising stock levels, tendering for larger contracts, and offering increased credit terms for customers. This is where choosing the right finance facility for your business needs can help you to keep the flexibility required to navigate uncertain times.

Keep a Healthy Working Capital Surplus

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Now is a good time to review your investment plans. Particularly if they involve a large amount of debt, or if they are going to severely deplete your cash resources. If you have a major investment that will put your business under immense cash pressures, yet will only yield a return in the longer term, then perhaps now is not the best time to go all in.

Begin to employ stricter controls over business projects and plans. Keeping robust controls serves as both a guarantor of efficiency and as an early warning system. Keeping a close eye on projects is never more important than in uncertain times and, without creating a climate of fear that inhibits innovation, as a business owner, you should increase the levels of scrutiny on all aspects of your projects.

Be sure to develop a well constructed and communicated set of plans or goals. Have absolute clarity on what it is that you are trying to achieve, how you are going to achieve it, and what resources you need.

Then work out what is likely to stop you getting there. Plan how you would go about mitigating the likelihood of these things happening. Develop scenario strategies within these, so that you and your leadership team know exactly what to do in different circumstances, particularly if there are opportunities that present themselves, or risks to the solvency of your company, such as a large reduction in business.

Plan what structural and procedural changes you will make to your business in the eventuality of these scenarios playing out, and what the timetable would be for them. The more prepared you are, the more likely you are to ride through the rough period and make it out the other side.

Reassess your Business Plans

Have Contingency PlansStep 4 Step 5

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In times of economic uncertainty, it’s more important than ever to look after your existing customers. Study again why and how your customers interact, use and purchase your product or service.

Fully understand your customers’ position in the market. Make regular contact with them, make them feel looked after, listened to, and secure as your customer. Find out what their plans are. This means you can adjust earlier if volume is likely to change. Remember: you are their supply chain, and supply chain security is of utmost importance in uncertain times.

In short, look to foster closer ties with your customers. Any way you can improve or enhance your working relationship will promote healthy communication, and increase the likelihood of retention.

Reassess your purchase process. Is there a way you can adjust or refine this process to make it easier and more cost effective for your customers to buy and use your product? What steps in the process can be eliminated, and how can you save your customers time and money?

Reassess your customer service. Take a good look at your customer service resolutions and service ticket issues. Are there any problems that tend to reoccur on a regular basis? These may be the difference between retaining or losing an important customer to a competitor.

Another way to increase revenue and bring in additional business is to sell more to your current customers. Selling more of the same product to the same customer contact, or perhaps selling a related product or service that you know your customers also require may help to protect or grow your customer base. If you can offer related products or services, then your customers will be happy as they can save money and acquisition time, and you may be able to increase revenue and market share.

Nourish & Protect your Customer Base

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Where possible, secure binding contracts with your existing customers. This can provide certainty of volume in uncertain periods, helping to minimise risk and lessen the threat from competitors.

Review thoroughly all existing contracts too. This should be done as part of an overall contract ‘health check’. This may involve reviewing margins, so be sure that you can find an optimal balance between value and security.

This is also a good time to assess your customer concentration risk. Look to reduce reliance on any customers where you do large amounts of business. If you know that you would be in serious trouble if you lost a particular contract, then you need to spread your risk. It can be comforting to have a large, regular customer on board, yet it can also make businesses complacent. Uncertain times by their nature are unpredictable, and you never know when your key client may undergo a restructure, or cost-saving measure, leaving you out of the equation.

Exchange rate fluctuations since the Brexit result have given the UK good export opportunities, with the price of selling abroad dropping. Perhaps now is the time to look into exploring new markets and diversifying that concentration risk.

Review & Protect Customer Contracts

Spread Customer Concentration Risk

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Be sure to pay your suppliers as promptly as your business model allows. Any uncertainty you may be experiencing is likely to be affecting them too. Problems with your suppliers’ cash flow could easily translate into price increases, or forced renegotiation of terms, which translates into increased cash flow pressure and fulfilment problems for you.

If your cash flow allows, pay up front and use your standing as a financially reliable customer to negotiate a discount.

Specifically designed supplier payments finance products such as Pay4’s unsecured revolving credit facility are available to enable this, providing a much-needed injection of working capital earlier in the cash flow cycle.

Refine & Protect your Supply Chain

If your company works heavily with EU suppliers, the creation of new trade agreements post-Brexit may affect your supply chain. When mapping operational risks to your supply chain, be sure to take into account the effect of potential new regulations, and create scenarios. Take into consideration the specific characteristics of your suppliers, and weigh up the likelihood, velocity and impact of any risks.

As with your customer base, you should look to reduce the concentration risk in your supply chain. If you are too heavily reliant on a single supplier, then this could result in either the supply drying up if your key supplier runs into difficulty, or increasing prices due to lack of competition.

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Avoid Trading Solely on Price

Try to improve the efficiency of your supply chain through prompt payment discounting, process improvements or collaboration with other similar businesses, rather than be sold on the supplier with the lowest prices. At a time when competition is higher than ever, unreliable order fulfillment or quality control can be the difference between a key customer sticking with you, or moving to your main competitor.

Using heavy short-term discounting of your product or service is also a risky and often loss-making strategy over the longer term. It dilutes your brand equity and can weaken your margins. Any short term improvements in your bottom line will soon be eroded when the economy eventually improves - it could take years to get your prices back up to where they should be.

If your business is operating in an industry where branding is less important, for example, motor fuel, mineral water and grocery stores, then price promotions may be more effective. However, they are still likely to erode brand equity and drive value out of your market, making recovery difficult.

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Look After your People

It is not only business owners and leaders that feel the pinch during uncertain times. Employees may have increased debt, greater financial exposure, or even properties with negative equity. It’s very likely they will be worried about their futures. This is where clear, honest communication and transparent strategic leadership is crucial. Managers and business owners need to ensure their employees are aware of any issues with implications for them.

Be sure that your employees are fully aware of the wider context, the role that your strategy has in building business resilience and that you have a robust and sound plan for success, so that any legitimate change initiatives designed to reduce costs are more likely to be accepted rather than resisted.

It’s also important to consider the longer term implications of keeping a workforce that is insecure. Once the economic recovery begins again, they’ll have plenty of new opportunities to choose from and will no doubt have one eye on the door.

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According to a Deloitte study on ethics in the workplace, 46% of employees say that a lack of transparent communication from their company’s leadership is the main reason for looking for new employment at the end of the recession.

Unwanted or unplanned employee turnover is extremely costly to your business, in more ways than one. Even after you’ve taken into account the recruiter’s fees, training, new office setups etc, and included additional costs such as lost productivity, lost contacts and relationships (with clients, suppliers and industry networks), and also factored in the impact of staff changes on culture and climate, staff turnover can cost anywhere up to three times an employee’s annual salary.

And the cost to your business isn’t just a financial one. When you lose a key employee, you lose their experience, skills, relationships and knowledge. It also impacts staff dynamics and often the job satisfaction, engagement and stress levels of co-workers – especially if they have to cover the ground lost by the employee leaving.

Engaged, passionate employees that are kept in the loop, treated well, and bought into the brand, strategy, and direction of your business are not only more motivated to succeed, but also to stay and help your business survive and thrive.

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Consider Outsourcing

If cash flows are under significant pressures, then outsourcing can be a way to streamline your operations without sacrificing quality and fulfilment. The inherent flexibility that outsourcing provides may be more appropriate until economic conditions improve.

Outsourcing is not something to be entered into lightly however, as it offers both benefits and risk. Be sure to prepare, identify your goals, and be aware of the legalities.

Outsourcing can reduce costs on paper and allow a company to expand quickly during the good times. However, it can prove difficult to shrink services or get out of contracts that don’t fit the businesses’ needs, once recession or uncertainty hits.

Ensure there is contractual flexibility and focus on sound contract management from the beginning of the relationship, right up to and including dispute resolution, should it become necessary.

If you already outsource components of your business process, then your contracts need to reflect the times you are operating in. Contracts that were drawn up during boom time may not reflect the necessities of your new, leaner business operations.

Flexibility and balance are key to ensuring outsourcing agreements last the course of any uncertain or recessive times. The company that achieves the right balance can see significant cost savings and advancements in efficiency and innovation.

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Refocus your Propositions

Rather than attach extras or new developments to your product or service just to be seen to be doing something, take the time to thoroughly research your market again and reexamine your offering. Reassessing and honing your value propositions to speak directly to the needs of your customers is essential to surviving uncertain times. It maximises your chances of resonating with your target audience and increases the competitiveness of your offering.

Step 13

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Using these questions as a starting point, consider providing “added value” to your offerings. Be mindful that they do not negatively impact your margins or undermine your brand. Study your existing customers and get out there to talk to living, breathing prospects.

This is the time to make sure your target audience understands why your product and/or service proposition is compellingly better and different from your competitors.

Be sure to assess all propositions around the following four questions:

Who is our target audience?

What are their needs?

How will we meet those needs?

How will we be compellingly better / different to the competition?

“Progressive companies stay closely connected to customer needs - a powerful filter through which to make investment decisions.”

- Harvard Business Review

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“The one element of your business that should continue to expand is marketing. We should not abandon our marketing strategies but rather adapt them to the new realities. Uncertain [prospects] are more likely to go with a trusted source.”

- Robert George - “20 Basic Strategies for Surviving Tough Economic Times”

“...if you increase your marketing investment at a time when competitors are reducing theirs, you should substantially increase the saliency of your brand. This could help you establish a long-lasting advantage.”

- Millward Brown - ‘Marketing in Uncertain Times’

According to a comprehensive Harvard Business Review study on business survival during recession, judiciously increasing spend on R&D and marketing will not only produce benefits during the recession, but will add substantially to sales and profits afterward. The resources freed up by improving operational efficiency can finance much of this additional expenditure if a balanced strategy of success and survival is undertaken.

Protect or Enhance your Marketing

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However, it’s not simply a case of throwing more money at marketing and expecting better results. Making the marketing budget work harder in uncertain times is of utmost importance.

This includes Social Media. Even if it’s not particularly your thing. Interacting with prospects and customers online and using social media for advertising are all ways to increase both your profile and your reputation as a company that is easy to deal with and responds to changing customer needs.

Try not to neglect your advertising. Rather than attempt flashy short-term promotions that can damage your brand, make sure you consider the longer term effects of advertising investment. It may seem tempting to cut spending on advertising during uncertain times, and increasing ad spend may feel counterintuitive. But during those uncertain times - when demand for media time and space is lower - media costs are likely to go down, making good advertising deals more likely.

Content marketing is a great way to enhance the value of your brand, engage prospects, and stay top of mind. Rather than throwing out more adverts explaining how great your product or service is, content marketing educates the audience over time with value-added information in order to build a relationship. Other businesses going through uncertain times are also looking for value and guidance. If you can speak in a language that they not only understand but are actively seeking out, then you will drive traffic to your website, and prospects to your proposition.

Having a specialist copywriter can ensure your marketing copy is working as hard as possible. With more impactful marketing copy, you may be able to maintain or even increase your level of advertising awareness, even with a reduced budget.

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Contact former customers. Explain how your proposition has been enhanced. Try to discover which of your competitors they are currently with, and how you can offer them better value. It’s important not to attack solely on price however. You still need to make a profit.

Contact former prospects who decided not to go with you previously. You may find that their circumstances have changed. That project that was put on the back burner may now have been put centre stage, and your product or service could be back on the table. That competitor that took the contract from under your nose may now be struggling to offer value, or neglecting their customer base. Be the company those customers would rather use.

Get Smart with your Business Development

Be sure to keep contact with prospects, even if they don’t choose you initially. Don’t forget, the more recently you contacted a prospect, the more likely they are to think of you when the time finally comes to make a purchase. Keeping a good CRM system with regular contact to your prospect base through email, newsletters, direct mail, blog postings etc can help keep you ‘front of mind’.

Contact the competitors of your present and former customers. Usually the competitors of a customer require the same products or services as they do, and may well be looking to improve their own competitiveness. Just be sure not to put any of your customers out of business.

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Investigating the potential efficiencies and market engagement that online technology can provide is essential to ensuring your business is connecting with its customers, and providing the service levels they expect.

Are you selling your products or services online? If not, then why not? Even if you can reasonably insist that your customers buy wholly in person or on the basis of interpersonal relationships, they will very likely research your company, products, services, and consultants online before committing to a purchase or business relationship.

Re-Examine your Online Presence

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Step 16Keep a close eye on your key contacts. Labour statistics show people entering the workforce today are likely to change jobs seven to 10 times during their careers. Approaching relevant people in your contact list as they change jobs can often be a fruitful way of finding new business. If your customer contact is leaving the company be sure to ask them for new contact information. They may be looking to impress upon arrival at their new role, and your value-focused proposition may be just what they need to make an early mark.

Utilise the direct contact experience of your sales team. They are meeting your customers every day. Is there any way you can help your customers achieve their business goals, through providing additional value? Fostering close ties and open communication with receptive and forward-thinking clients can be instrumental to the progression and enhancement of your value proposition.

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Make sure your business is operating on all marketing cylinders by establishing or improving your online presence. Are you being found easily by your prospects? Do you have a member of staff whose responsibility it is to ensure that when potential customers are making a decision about who to buy from they can find your business easily and discover all the information they need to help them overcome their reservations?

Is your website optimised for mobile devices? According to Google 61% of users are unlikely to return to a mobile site they had trouble accessing, and 40% visit a competitor’s site instead. (McKinsey & Company), while a study by Nectafy found 88% of consumers who search for a type of local business on a mobile device call or go to that business within 24 hours.

If you are not providing a satisfactory online and mobile experience you will lose business to competitors who are.

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Beyond Survival...

“Today’s problems can be so immediate and all-pervasive that they can act as blinkers which result in a myopic focus on the present, to the exclusion of a more strategic vision of the future.”

- Harvard Business Review

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It’s important to see these tactical adjustments in terms of a wider, long term strategy designed to make your business more robust, operationally efficient, and value-driven. Be focused on building the resilience of your business for the vicissitudes of the here and now, but not at the behest of longer term planning and the potential for post-uncertainty periods of prosperity.

It can be easy to see the task of surviving uncertain times as no more than an extension of general financial risk management, which simply requires financial “buffers”.

Although cost cutting can be a necessary part of becoming a more efficient business, it should be undertaken with a lot of care and consideration.

However, those business that are more progressively programmed for longer term success see the challenge in broader terms. Incorporating a more flexible approach to strategy and more regular reviews of progress and change while judiciously increasing and protecting investment in key areas helps to create a balanced business model that is more likely to survive uncertain times.

Be Careful When Cutting Costs

Seeing everything through a ‘loss-minimizing lens’ can cause the culture within a business to aim low and therefore impede innovation. It also has the potential to lower quality of output and therefore reduce customer satisfaction at a crucially competitive time. Effectively, instead of learning to operate more efficiently, the organization tries to do more of the same with less.

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Focus on Operational Effectiveness

Companies that master the delicate balance between cutting costs to survive today and investing to grow tomorrow are more likely to do well after a recession as well as survive the uncertain times.

These companies reduce costs selectively by focusing more on operational efficiency than their rivals do, even as they invest in the future by spending on marketing, R&D, and new assets. This multi-pronged strategy is the best antidote to uncertain times.

The key is to cut costs through operational efficiency, not just by reducing headcount.

Maintaining a focus on operational efficiency helps to foster a more understanding and optimistic workforce, resulting in more innovative staff engagement and creativity around reduction of costs. Your people aren’t spending their time worried about their jobs, and looking elsewhere for more security. And despite redundancies being a quick way to reduce costs, they also make recovery more difficult. Who would want to work for a company that cuts headcount as soon as times get tough?

Focusing on your operational efficiency will ensure that those costs are reduced on a more permanent basis. It will also make sure your business is optimised for continued success post-recession, without having to deal with the costs of re-hiring once things improve.

“Companies that rely solely on cutting their workforce have only an 11% probability of achieving breakaway performance after a downturn.”

- Harvard Business Review

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Don’t be too Opportunistic Don’t be too Defensive

It’s also important not to be too opportunistic while ignoring the warning signs. This is a risky strategy to employ. There is the chance that your investments will take longer than anticipated to payoff, or your product or service innovations do not resonate with your customer base.

Attempting to pile on value-added enhancements to differentiate yourself from your competitors without fully understanding the context of demand in your market can result in a loss of connection with your customers and prospect, and a reduction in market share.

Taking on an overly defensive, ‘siege’ mentality that includes reduced operating costs, shrinking of discretionary spend, a ‘no-frills’ approach to strategy, lowered headcount, reduced marketing, and cash preservation may also cause problems for your business. Your workforce will be demotivated, and innovation will decrease, precisely when you need new solutions to the new problems you are facing. This may save you money in the very short term, but will make it harder to bounce back from the period of uncertainty, and configure your business for longer term success.

“Even as customers clamor for lower prices and greater value for money...companies add bells and whistles to their products. They simply don’t notice that because the pie is shrinking, they must capture an even larger share from rivals to keep growing.”

- Harvard Business Review

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Strike a Balance

Adopting a more pragmatic, balanced approach is likely to maximise the chances of your business surviving a recession or period of uncertainty. Recognizing that cost-cutting is necessary to survival while also understanding the role investment and innovation plays in long term growth is key to steering your business through choppy waters.

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With a balanced strategy that accepts the reality of the present and reacts accordingly, while also preparing for the future, businesses can not only survive uncertain times, but learn valuable lessons that will stand them in good stead for longer term success.

Judiucious investment, proactive innovation, increased operational efficiency, refocused propositions, honed processes and competitive advancement are all possible. While other businesses are pulling back, the opportunity is there for your business to gain valuable market share, if you approach your situation pragmatically.

To improve your chances of success in these turbulent times, you need to be well prepared with strong cash flow, a healthy and varied customer base, optimised marketing, a robust and diverse supply chain and the working capital to seize upon any opportunities that may arise. Only by striking this balanced, progressive and proactive approach to strategy will you see your business through the tough times, and out the other side to long term prosperity.

Uncertainty is now a fact of life for many business owners. Yet with uncertainty also comes the potential for opportunity.

Finding your Silver Lining

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