One thing that history has shown us is that running a business will involve its fair share of ups and downs. While each business will have its own unique ride, all of us are impacted by the global and New Zealand economy in some way. All businesses should prepare and plan for periods where the phone may not be ringing as much or purse strings are tightening. Because even the longest boom periods will come to an end - when the tide goes out, you want to stay afloat!
Each business has its own set of goals, but we’d suggest including ‘the ability to survive in any typical economic conditions’ as one all of us would benefit from. Because building a stable business comes with plenty of other benefits, aside from simply reducing your risk.
In this article we take a look at some common ways to start building this strength in your business. For more tailored guidance, get in touch with our team to discuss it more.
Diversifying your business
Does your business rely on a small or singular product or service? Or perhaps a specific customer type or industry you service? While it makes sense to start with a more simple model, adding new offerings or targeting different use cases and industries is a smart way to protect your livelihood from market changes. And it may feel like diversification is a big job (sometimes it is) but often there are logical expansion steps to make that won’t be too much of a mountain to climb:
- Offering a product from a supplier - What other products do they have that would be complementary to what you currently sell?
- Provide a service that relies on certain skills in you or your team - What other services might these skills translate well to?
- Targeting consumers only - Could you move into business customers too?
- Working with mainly one type of industry - where are there other use cases for your offering?
- Are you a product business that could provide peripheral services such as support, repair or trade-ins?
- Ramping up ecommerce activity alongside retail.
If you’ve got multiple ways you could be expanding your business, list these and start with those that are the quickest and easiest to roll out. You might also benefit from talking with your customers and understanding what they need.
Read more about diversifying your business in our full article.
How flexible or rigid is your business model?
Striking a balance between a tried and true model for delivering your services and adapting to the needs of your customers can take some trial and error. Building stability relies on both of these aspects.
An overly rigid business model can mean missed opportunities with customers whose needs might be slightly different from the norm but would otherwise be a good fit. It can also mean that the business is slower to adapt to evolving trends in the industry. On the other hand, having some clear frameworks in how you sell and provide your product or service is important to help anchor your business decision making, train your people and scale.
Creating a business model that changes constantly can have a number of drawbacks too. First, it can make it hard to define your target market and thus make the brand and marketing tricky. Being too flexible can also make it hard for you and the team to work with predictability or process which can wear everyone out, fast. This lack of structure will also create problems around quality control in your offering. Lack of clarity is rarely a positive thing.
Instead, creating stability is going to be a mixture of a core business model that is easy to follow, combined with an open mind for new opportunities. New ideas and feedback can unlock growth for business, but this should be managed and analysed carefully before implementing.
Building a war chest
Cash reserves aren’t the easiest to build up, especially in quieter patches of business. Rather, building a rainy day fund is something that will take years of sustained, but manageable saving. A ‘war chest’ in business is often talked about in the context of having money aside to make investments and moves when opportunities unexpectedly arise. But a war chest is also important for those times where the business may struggle to meet costs due something in the market or even the impact of an unforeseen expense. No matter what the war chest is used for, it’s a much cheaper option than interest bearing business loans.
For stability during uncertain times of business, a war chest or rainy day fund is a wise decision. It’s also a welcome addition to any balance sheet. As for how large a war chest should be, this is completely down to the size of your business and the costs you carry (or the types of investments you think the business may need to make). Some businesses will plan their war chest based on how many months they would want to meet costs in the event of a downturn. This includes payroll, supplier costs, rent, utilities and so on. For others it will be a round figure that reflects the future expansion plans of the business such as enough to acquire people, premises or even another business when the time comes.
Focus on building your people and culture
Leadership when times are good is one thing, but helping everyone navigate through uncertainty is a whole other matter entirely. The investments of time and effort you make in your business to cultivate an environment that people love coming to each day can absolutely return dividends when times are tough. In order to create a strong culture, you (or your leadership team) have to work on both a 1-1 level with staff, alongside creating plenty of moments for the group to come together and properly get to know each other. This should happen in both social and work contexts.
As trust builds between your people, and between leadership and the rest of the team, you’ll start to feel and notice the cogs of the machine working better. This includes:
- More open and honest conversations
- A desire for the team to do right by each other
- Supporting each other through challenges
- More constructive performance reviews
- Healthier stress levels and management
- Higher motivation to do the best job possible
- Lower staff attrition rate
- Better customer experiences and service
Trying to correct a culture is hard enough at the best of times, but it’s much harder when trying to survive in a struggling market.
Introduce technology to improve processes
Could the business be reducing costs and freeing up time for more valuable activities if you harnessed the power of technology? Having more time to focus on acquiring new customers, ensuring quality remains high and supporting your team are vital for an owner or leader to give the time they deserve. If there are financial or operational activities that good software can help with, this could be well worth exploring.
Artificial Intelligence is continually growing in popularity within businesses and is helping to streamline everything from supply chain management to summarising meeting discussions. And this frees up that all-important time to steer the business through whatever rocky patches it may face.
Chat with your customers
It’s near impossible to not lose customers, but you can greatly reduce churn by talking with your customers on a regular basis. Communication with customers outside of the moment of purchase has a number of benefits that can help later on during periods of turbulent business or market conditions. These include:
- Understanding aspects of your offering that could be improved or explained better to your target market
- Motivators for your customers buying from you in the first place
- Showing an appreciation and care for your customers past and present
- Staying front of mind should they need your offering again
You can use a combination of methods to chat your customers whether that’s in person, a phone call and broader email comms.
Establish new business to business partnerships
Are you in an industry where there are complementary businesses that also serve the same customers? This might be an opportunity to collaborate and network to build some enduring referral channels that can be invaluable later on. It’s important to remember that any business partnerships need to be in your business’ best interest and that you’re not inadvertently missing out on business elsewhere as a result.
Get your forecasting in focus
Forecasting is a valuable tool to plan for the future. A good practice to get into with forecasting is to scenario plan. What do the different levels look like for the business, including if your market or the economy goes quiet. This can help your business be less blindsided by what may come in the future which will lead to smarter decision making rather than panic.
Revisit and reaffirm your vision
Sometimes a business can ride a wave of success but neglect to keep anchored to a vision. This presents a risk when that wave dies down of not having a north star to follow. By knowing what the business vision is (and purpose), the business can continue working towards this regardless of what’s happening in the market. It may take longer to get there, but at least the journey is clear!
Need help navigating your business? Let’s talk
Helping business owners build a better business is what we’re all about. Our team of Business Partners aren’t just experts in all the mechanics of running a successful operation, we’re made up of former business owners. This gives us a unique insight and appreciation for what you go through, helping to deliver better guidance and speak our clients’ language. If you’re a business owner who is in need of some support and an outside perspective, learn more about our business advice or get in touch with us today.
Disclaimer: The information provided in this article is intended for general informational purposes only and may not apply to the specific details of your business. For personalised and tailored advice, we recommend reaching out to our professional team. While we strive to provide accurate and up-to-date content on our website, RightWay assumes no responsibility for any business loss or damage that may arise from relying on the information provided.
