As much as you want predictability as a business owner, uncertainty is something that won’t go away. That’s why it’s important to take steps to protect your business.
While external conditions may seem unfair, you should remember that everyone faces the same types of issues. In fact, in late 2019 a PwC survey found that 81% of CEOs were concerned about uncertain economic growth. Given the dramatic changes in this year’s economic outlook, they were right to be worried.
The COVID-19 outbreak means that entrepreneurs are more unsure than ever about their next move. The economy is contracting. Businessowners face store closures. Whole industries are shutting down and laying off staff. What should you do to minimize risk?
Invest in your employees
It is difficult to think of investment during times of uncertainty, but staff are your most important asset. It is a difficult decision to hire in a downturn or when your industry is shaken by external pressures; it goes against the grain, and you will watch your competitors cut back and reduce their expenditure. But if you hire the right people, it can help rather than hinder your company.
Where should you invest? One way to do this is bring new, talented younger workers into your business. Hiring from younger groups means that you will have loyal, hard-working employees for years to come. It will also bring new skills and fresh thinking into your company at a time when you will be looking to find new opportunities and identify new revenue streams.
According to a poll by the Bill & Melinda Gates Foundation Young, people are more optimistic about the future. In the current climate, this is an invaluable quality; in a downturn, you need people who do not only see challenges, but see opportunities as well. This isn’t only theory; successful investors, businesspeople and executives have seen this work in practice too. As veteran investor Andrew Dixon says: “the talent in our young people is immense, and we need to do more to unlock it”. Young people can give you the edge you need to think through difficult problems and challenges at a time of rapid change.
Another way to invest in employees is by upskilling your staff. A downturn is often an ideal time to learn new skills; your employees will often have more time on their hands, so why not use it to train your employees, so you can operate as a stronger business on the other side of the crisis. Online learning, as well as digital proficiency and remote software usage will be vital during this period. According to a PwC survey, 77% of employees want to learn new skills to improve their employability.
Also, as a business you need to take steps to keep your employees positive and optimistic; that might mean investing in off-site activities, team meals and lunch, or other activities while morale is low. The way entrepreneurial teams work together plays a crucial role in the outcome of the business, according to academic research led by Professor Linlin Jin. It is important to have an optimistic, capable team. This ensures productivity and good morale in a hard time for every company.
Become a nimble enterprise
As a business owner, you must be prepared for change, whether that the 2008 financial crisis, the current Covid-19 outbreak, or even something minor.
The point is be prepared. Don’t let yourself get stuck doing one thing. A YPO survey found that 82% of business leaders expect a decline in revenue in the next six months, but 54% anticipate they will be back to normal in a year’s time. You need to seize this opportunity. Speed up when other businesses are slowing down.
Organisational change doesn’t have to be a complete overhaul. In fact, it’s better to start small. Little changes add up. As Greg Satell has written in HBR: “[d]on’t fall into the trap of thinking that just because you’re starting small what you’re doing isn’t meaningful”. Soon your business will be prepared for any situation. Even something as major as the economic downturn caused by COVID-19. This will require huge fiscal spending to fight.
As fashion entrepreneur Amancio Ortega says, “speed is everything”. You will notice gaps in the market that others don’t. You might spot the opportunity of a lifetime. Ensure that while other businesses are too afraid of risk, yours is the one making all the right moves. It’s easy to take the safe option but being a successful business leader isn’t always easy.
Diversify your business model
It’s difficult to predict the right time to change direction. There is a lull in the market, and many companies mindful. The market fall over the past few weeks has made many business owners too concerned to alter their strategy.
Being nimble isn’t just about being prepared for change. It’s about being bold. Consider what you could be doing better to win business in this uncertain climate. Do not let your business stagnate. When your business is hit by external pressures, it can be easy to put up your hands and say that ‘nothing can be done’ – that you are a victim of unfortunate outside forces. Instead, use this pressure as a motivating force to look fresh at your business – and find new opportunities.
If your business is pigeonholed into certain area, then it might be hit hard. Many consumers spend money only on essentials during times like this. Very specified industries will be hurt. Harvard professor Michael E. Porter noted that diversification is most effective when combining activities that are related and reinforce each other, rather than a collection of isolated activities.
So, dip into areas of the industry where you haven’t previously. If your business is a jack of all trades, it will be more capable in times of crisis. You could even investigate alternative sectors. There are a multitude of ways to diversify your business.
Economic growth is slowing down, but that doesn’t mean your business has to. Use this time to invest wisely in staff and new ideas. When the market picks up again, you’ll be on steadier ground than your competitors.
Futureproof your company
Businesses get bogged down in the present. Income loss, staff layoffs and store closures mean they might be too cautious to take risks. This is not ideal for any businessowner. Don’t let analysis paralysis harm your profits. There are steps you can take to protect yourself.
Every business faces the threat of running out of cash or lacking a competitive edge. But you might not consider becoming irrelevant due to advancements in technology. Use breakthroughs in cybersecurity, AI and production to your benefit.
A McKinsey study found that early adopters of AI had higher profit margins, due to their strong digital capability and proactive strategies. They expect this gap to widen in the next 3 years. If you invest in development, you could be rewarded with improved efficiency and drastically lower costs.
You must become an expert in new areas to protect yourself from uncertainty. Entrepreneur Glenn Llopis notes that, “today’s corporate leaders must be potent pioneers”. Thought leadership is critical to gaining traction in the industry and drawing attention to your company.
But futureproofing isn’t just about investment. You need to plan properly. Always keep an eye on what’s next. Business forecasting is all about strategy. If you set out action-orientated goals, you are more likely to achieve them in a timely fashion. In 2019, we saw a 9% drop in the amount of CEOs who were confident in their revenue growth over the next three years. In a market where top executives are concerned – you must be prepared.
Understand where you are as a business, then act accordingly. This will allow you to set a clear growth trajectory. Make use of business services companies to assist you and constantly review your plans. In an uncertain market you may need to re-evaluate and change quickly.
If you follow this advice, your business will be protected from market uncertainty. Invest in youth, upskill your employees, and learn to be a nimble player in your industry. These qualities, in combination with proper planning, will ensure your company is ready for anything the market throws at it.