In this article, the second of a three part series, we focus on the rebuild phase. As restrictions ease, organisations are now starting to shift focus from activities that were required to ensure immediate business continuity and shock resilience to those centred on rebuilding and growth.
While the short-term outlook for businesses in the private, mid-market and family business sector varies greatly by industry, it’s important to consider what rebuilding and reshaping will look like once the economy begins to return to a state of normalcy, or establishes a new normal. Putting a strategy in place for this phase and beyond will help prepare you and your business to take advantage of opportunities in this rebuild phase.
We believe there are seven main areas you should be training your focus now.
The first step in developing a rebuilding plan is to determine just how deeply your business has been impacted to date from the impacts of the crisis – but to understand this, businesses need to look beyond the financial numbers.
While comparing your financial results to last year’s numbers will allow you to see how much your business sales, profits and cash flow has been impacted, consider some of the other factors you may need to relook at. For example, if employees have been laid off, businesses need to account for that in the rebuilding plan. Customers lost due to their businesses failing or because they have migrated toward competitors, will also need to be accounted. And for bricks and mortar businesses, taking stock of existing inventory and how that stacks up with demands in the market is another factor to consider.
During the past three months, all businesses have had a focus on cutting costs, but to give your business the best chance of surviving, a renewed focus on costs will allow you to position your business for continued success.
Cost optimisation is more than just cost cutting and belt tightening, and short-term tactics alone will not lead to sustained business success. Typical reasons for increased pressure to rethink costs are: financial distress, downward pressure on revenue or prices, changing consumer needs, intensifying competition, need to fund growth or strengthen the balance sheet, pressure from shareholders. Our experience working with private, mid-market and family businesses has shown that organisations that take a more holistic, strategic view will have a greater chance of success.
Understanding your business’ cost drivers is critical to identifying the right cost opportunities and avoiding unnecessary negative impacts on your business, customers and staff.
A successful cost optimisation initiative starts with gathering current cost base and performing a spend analysis. This will help inform your needs and sets a baseline to measure and track success. Industry trends, benchmarking data and access to industry, or functional experts may help to improve the identification of the right cost opportunities.
Most businesses in private and mid-market sectors don’t usually have a large amount of cash on hand and it’s likely that any cash reserves are already depleted. Hence, there is a good chance that businesses will need access to working capital to rebuild and reshape.
There are several options for business to seek access to capital during the rebuild period. Federal support programs designed to help small and medium businesses impacted by COVID-19 is an obvious place to start.
The challenge with federal programs is that the funding is limited – so it’s important to consider other sources of small business funding, including:
The current crisis is first a humanitarian one, before anything else businesses should keep relentless focus on supporting employees through this.
The JobKeeper Program, for example, is a great way to retain your employees during the coronavirus pandemic, who are likely experiencing financial stress at this point. Understand that employee retention is an important part of any rebuilding strategy, as research shows a new employee takes at least three to four months before achieving the same productivity as an existing one, and costs of employee retrenchment and rehiring are substantial.
Have frequent and transparent conversations with your staff. Involve them in your planning processes as you map out future plans for rebuilding and reshaping the business. Truly engaged employees often offer the greatest ideas and involving them in the rebuilding stage will give them a sense of ownership in their roles and responsibilities.
This crisis has illustrated just how real disruption can be, and has highlighted any gaps in operations and technical investments. It is now important for businesses to start thinking more strategically about technology and digital capabilities, and investing in uplifting their technology capabilities as an imperative rather than a nice to have. Leveraging the new digital working order to your advantage will require strategic thinking around where the best opportunities lie to deliver lasting business value, customer experience and employee satisfaction. Some low cost benefits we consider SME businesses can get started on include:
Australian private, mid-market and family businesses will need to re-think their business model – there has been a huge shift across so many layers that re-casting the mould is a necessity. Businesses now need to pivot to adjust to a new normal.
Organisations will need to reshape their business models to respond to changing consumer needs. Consideration will need to be given to how each aspect of the organisation, from customer experience and sales to supply chain and back office, will need to seamlessly collaborate to address customer expectations in the future. Key areas to relook at in your operating model include:
SME business leaders will find that doing everything at once may not be realistic when considering how to rebuild. Having a prioritised plan with your most important actions first can help give structure to this huge task.
A logical order of events might look like: securing funding, rethinking the operating model, launching a cost optimisation program and new supplier relationships. Set a time line for hiring employees, restocking inventory, and, finally, reopening your doors if your small business is closed.
As you take necessary steps towards rebuilding your business, remember to track your progress. This is particularly important if you’ve secured capital to fund your business, because you don’t want to waste time on activities that aren’t delivering a solid return on your investment. Often getting external help to project manage such critical initiatives yields better results as an external party can quickly assess issues and raise these. Transparency, candour and speed are important and can be hard to muster up for internal employees.