Restructuring the business strategy
This article was written by Seth Morgan. More on Seth can be found below the article.
The pandemic continues to disrupt our work and personal lives. This has created challenges and opportunities in getting customers the goods and services they need. As a result, many SMBs and startups have succeeded, while others have struggled and failed. Why?
COVID-19 has permanently affected how we live our lives and conduct business. As a result, businesses need to be flexible and draw on expertise in all areas across their market and disciplines. In addition, companies that can quickly form effective teams to restructure their business strategy will be best positioned to respond to new opportunities.
This creates excellent opportunities for SMBs to respond more quickly to these disruptions to fill these new needs. But to succeed in this new world, SMBs must overcome inflation, supply chain issues, and the Great Resignation.
Uncertainty caused by inflation
The US economy is seeing rates of inflation that are the highest since 1981. Factors like the conflict in Ukraine and the continued impact of the pandemic mean inflation is likely to increase around the globe. These levels of inflation are felt in our everyday lives. But the impact on a small business owner can cast doubt on the assumptions behind their business strategy.
Being a provider of fractional CFO and business financial services, I see many small business owners paralyzed by uncertainty and fear. Most owners rely on a gut feeling for the condition of their business. That feeling gives them the confidence to make decisions. But when the circumstances change in unexpected ways, they lose that feeling, and anxiety sets in. Then they become paralyzed by uncertainty.
During seasons of high inflation, businesses should focus on three main areas; cash reserves, warning systems in financial reporting, and key relationships with vendors and customers. SMBs can be overly affected by inflation, but they are also in the best position to respond quickly. The answer is to have more clarity about all aspects of the business, beginning with finances.
Knowing how much money you have in the bank does not tell you how that money got there or where it is. But you may find you don’t have the resources on your team to answer those questions. If this is the case, a business owner should consider engaging with an outside financial expert. Fractional CFOs are a growing part of the SMB landscape, and adding one to your team can give you a needed boost and help you restructure your business strategy with real data and metrics.
Supply chain disruptions
The second challenge facing the post-pandemic world is supply chain issues. From gaps on grocery store shelves to long wait times for finished goods, these all represent breakdowns in getting materials and goods to those who need them. The problems causing supply chain disruption are many-faceted and not easily solved.
SMBs have fewer product lines, so they can be disproportionately affected by breaks in their supply chain. But SMBs can also respond quickly, communicate effectively, and aggressively move toward new opportunities. Disruptions in the supply of materials mean opportunities appear in previously entrenched markets. The right startup or SMB can restructure its business strategy to quickly capture this new market share.
But changing your business strategy should be done carefully and with the input of a team. You need data on each aspect of the process and projections of the impact of future disruptions. Serving on such a team goes further than just offering your opinion about the options on the table. Team members must be prepared to dig into the numbers and talk to people inside the company to get the best answers. This holistic approach can include getting input from outside experts or even competitors.
A business owner shouldn’t guess how certain decisions will play out. Your business strategy should give you a set of variables to play with and help you envision your company’s future state. An effective business strategy is a roadmap for normal times and a gauge against which to assess new opportunities. That business strategy must be built upon an effective financial strategy. And that makes this financial expertise even more valuable to your team.
The Great Resignation
In addition to uncertainty, businesses face one of the tightest labor markets. And the Great Resignation has made the market for qualified employees highly competitive. The costs of employee turnover are high. As a result, it may seem necessary to do whatever you can to try and keep someone who is considering leaving. But a discontent or unengaged employee is also a cost to your company, so you must find the right balance.
The first solution is to retain the employees you have. This can be difficult in an employment market where many companies offer high wages and signing bonuses. Many SMBs find they cannot compete in this market solely on benefits and pay. But other things that small companies can offer are also important to employees.
The good news is that job satisfaction is influenced by employee pay only to a point. The other factors include respect, training, engagement, company culture, and flexibility. These are all areas in which SMBs can excel. And employers who handled COVID-19 requirements well saw an increase in employees’ desire to stay.
A good workforce is an appreciating asset, not just in operational performance but in long-term enterprise value. You need to make sure that everyone is positioned to make the best use of that asset. This benefits the employees, the company’s performance, and even the company’s valuation.
Including employees on teams brings their experience and expertise to the table and increases their engagement in the future success of your company. In addition, paying attention to employee experience often didn’t seem like a priority before the pandemic. But now, with remote work and new challenges to overcome, asking employees about their jobs is an essential component of a restructured business strategy.
Investing in your people is always the right move. The trick is first understanding what actually motivates them and then doing it with careful consideration and planning to conserve your capital. This creates employee loyalty, and taking care of your employees is often your best form of advertising for new ones.
But a business may still find they lack essential team members. Then, you may look to an outsourcing provider for roles you need to fill. This can be cost-effective for lower-skilled or specialized work but becomes more challenging when integrating particular expertise into your business leadership.
Contracting a fractional or outsourced C-Suite member is often the right solution. But a word of caution: Working as an outsourced C-Level provider requires a different mindset. Being a fractional member of the team means you need to be able to get up to speed quickly and find places to make your influence felt. It means learning to advise and execute, often simultaneously. Not everyone coming from a full-time, big company background can do that.
Another form of outsourced expertise is to implement a technology solution. More and more tools for planning, project management, and business areas are available. And many utilize AI to assist with decision-making and trend recognition. In a rapidly changing environment, you need to model various options and get quick feedback on the effects of your decisions. In this scenario, AI-based digital applications can be attractive as they promise to help you do more with your people.
But this can also be a pitfall when these technology platforms are not properly vetted and implemented. We see many companies that have had a failed technology implementation. These solutions sound great in the sales presentation, but there are always unforeseen challenges and costs. Those mistakes can set a company back months or years or completely sink it.
The solution is to work with a team to design the process you need without committing to a particular technology solution. Often the platform vendors will offer consulting services as part of the package, but that is all provided to sell you their product. You need an outside, objective perspective to help you design the process, evaluate the technology solution, and implement the one you choose.
The right technology can provide a huge boost to a business. But, you have to remember that these services will not answer questions you don’t know how to ask. And, if deployed too soon, they will only make your confusion and uncertainty worse. The better approach is to work out your process beforehand, then find the right tool to streamline and automate that process.
Balancing your solutions
In today’s unpredictable environment, no one solution will solve all your problems. But certain elements should always be in the mix. Start with your existing team and ask how they can be more productive and engaged. This facilitates an open environment where gaps can be uncovered. Then you can look to outside expertise to fill those gaps. That may be a fractional member of your C-Suite, combined with the expertise of a technology solution.
There have never been more resources available to SMBs. And, when applied effectively, that is a good reason for a positive outlook.