Turmoil is heightened uncertainty, and it seems that we will be experiencing a period of this. We all seek certainty, although it is an illusion and to progress we need to embrace uncertainty. We’ve written about this over the years, particularly as certainty limits growth and uncertainty brings prosperity.
What can we control?
But right now, it seems as though the snakes and ladders of business have more snakes than ladders. We need to recognise what we can control and what we can’t. At the same time, it would be foolish to ignore how the business climate might be changing, whether caused by geopolitical events, or more local issues.
Do you know your business performance?
Starting with fundamentals, it is crucial that you understand your numbers, so you know where you are making and losing money, what’s happening with your cash flow, and how everything affects your working capital cycle. Your first action is to make sure your business survives. So, tune it up and understand it deeply. I’ve written a book on this Understanding the Numbers : Make Your Business and Your Life Better.
First, survive
If your first order of business is to survive, that means avoiding failure, and that means just staying in the game. Don’t try and do anything clever, wait for your competitors to make mistakes, and then capitalise on that. Do what you are good at as best as you possibly can. Don’t try to find some magic solution that will solve all your problems at a stroke. It doesn’t exist, not matter what you are told (or sold), and it’s high risk, just when you have enough risks to manage already.
Attitudes change
Next, recognise that when businesses experience uncertainty, they tend to become more transactional in the way they behave and value relationships less. Make sure you know which of your customers are behaving like this and treat them as they treat you.
Cash is king (always)
Make sure you also credit check your customers and stick to your terms. Fundamentally, businesses don’t fail because they are unprofitable, they fail because they run out of cash. Don’t let it happen to you. As life gets more difficult, customers may try to squeeze a few more days, but they may also be willing to pay on pro forma invoices, especially new customers, as they will understand your position because they’re in the same one. If you get a new customer, who wants to place a very large order, before you accept it, ask yourself why their existing supplier isn’t supplying them. Don’t accept the order without a pro forma invoice, because if they don’t pay on time, the result may be that your business fails.
Trim your cloth
You will know who your top customers, and top suppliers are. Also, you will know who your worst ones are. Make sure that your worst ones are contributing to the profits, commensurate with the aggravation they’re causing. And if they are not, it’s worthwhile usually dumping them, and trimming your overheads so that you end up with a bit more profit for a bit less work. More sales isn’t always the answer. You can’t eat sales. Profits put food on the table.
So far, we’ve mainly discussed internal actions. But you can take advantage of uncertainty as well as mitigating its negative effects.
Start small and fast
Some avenues will start to close off to you, but others may open up. Don’t rush blindly into them. Do small fast experiments. If it’s working, expand this activity as quickly as you can so that you fill that niche before a competitor does. That’s your best defence against competitive pressure. Whether it is for the whole business, or for a new opportunity, you need to scale it using these Five Steps Don’t miss any out, particularly the workflows, and don’t confuse a workflow with a process. The process is what happens to make the workflow work. Also make sure that you build in “what if” elements because not everything works exactly as we plan. Make sure you have a workflow for when things go wrong as well. It’s worth putting the effort in as soon as you know that your little experiment is working so that you can scale quickly. If you don’t, then you won’t be able to fill your niche quickly enough to deter competitors. If that happens, everything may get transactional, with lower prices becoming everyone’s default tactic.
How we can help you
We have been here before and we have all the tools and expertise to help you create plans that are agile, flexible and resilient, so that you will have strategies in place to overcome the unexpected, mitigate their effect, or avoid them. We can help you monitor the results, model any changes you want to take, and discuss with you the best ways of achieving your goals. My book helps you avoid mistakes that I’ve seen time and time again, that have cost time, money and good deal of worry.