Industry Insights with Bronwyn Reid
Author and Small Business Mentor
With global uncertainties, it seems that we just get through one crisis when another one comes along. Should SME's better plan for these contingencies?
Think back over the past 5 years. We've had a pandemic, horrific bushfires, cyclones, and devastating floods. They are national events that we all heard about on the news. Then there were computer hacks - some of these we heard about on the news as well. Below the radar of the news media, an unknown number of SME owners and managers encountered a death in the family, or a divorce, or illness that affected their business. My dad had a heart attack and was flown to the Royal Brisbane Hospital for surgery. That meant almost 2 weeks away from home for me.
And yet, we are always surprised when these things happen. We treat the non-crisis times as "normal" and react in panic when a crisis hits.
I believe that it is irresponsible of us as business owners and managers to remain unprepared for events that upset our businesses, and therefore our families. Part of the problem is that the risk management industry has made it all seem so complex that small business owners run a mile!
Of course, we cannot predict every type of crisis - I certainly didn't have global pandemic on my list - but there are certain events that we can be pretty sure of confronting at some time. Those floods, bushfires and cyclones are a familiar part of our Australian experience.
How can small business become more resilient?
Before I answer this question, I want to focus on the word "resilient" for a moment. If you type resilience into an internet search engine, you will get over 200 million results.
All the definitions include these elements:
- ability to recover from difficulties
- able to adapt to change
- grow and improve out of a tough experience.
So these are the traits that you want to bring into your business and your team.
But you, as a business owner or manager, need to think a little deeper and decide what resilience means to you. If you face a business crisis, what outcome would represent resilience for you?
- Your business survives intact, even if it is smaller afterwards
- You and your family can extract yourselves from the business with enough money to start again?
- You have the will and the energy to rebuild if all is lost?
There are many ways to build resilience - both as a person and in your business, so this is a huge topic.
In my book Small Company, Big Crisis, I pose 7 questions for you to answer:
- Do you have a Risk Management Strategy?
- Do you have a cash reserve?
- Do you have a single-client portfolio?
- Do you continuously monitor what is happening in your industry, the economy, politics, technology, changes, and social trends?
- Do you have the right insurance, and enough of it?
- Do you have all necessary legal agreements in place?
- Have you thought about how you are going to exit your business?
If you can give a positive, thoughtful answer to all these questions, congratulations. You will be at the front of the line for the inevitable upturn that comes after every crisis.
With your small business clients, what are their top three most common challenges you are hearing about right now?
The 3 most common challenges that I'm hearing about at the moment are:
- A shortage of talent. In fact, a simple shortage of employees - talented or not! Immigration has driven our economy for decades. Without immigration, we are short of labour -desperately short in some industries.
- Supply problems. When COVID 19 hit and the people, planes, factories and ships stopped, the world was clanking with the sound of breaking supply chains. Now we know that those long, long supply chains that were built for efficiency were, in fact, very risky. Supply interruptions will last for years.
- Fear of inflation. The breakages in supply chains and shortages of goods has sparked inflation. Developed western economies haven't experienced inflation for decades, so a whole generation of business owners have never experienced it, and don't know how to handle it.
The way customers consume is inevitably set to change, what opportunities can you identify for small businesses going forward?
What the pandemic did was to expose weaknesses in how we organise our society and our communities. The weaknesses became huge cracks as the way we normally do businesses with each other suddenly lurched sideways. But they were already showing before COVID 19 hit.
Those broken supply chains that I mentioned will provide opportunities for well-prepared businesses. Big companies have discovered how risky it is having all their products and many of their services come from overseas.
This is how I expect them to respond:
- Stop relying on just one country, or one company for supply. China, as the world's factory, provides us with clothing, washing machines, iPhones, car parts, artificial sweeteners, water treatment chemicals... and so many more of the things we use every, single day.
- Look at manufacturing in their own country or region. Local (as in within Australia) manufacturing has a whole, new appeal. Other South-East Asian countries such as Vietnam, Malaysia and Thailand are emerging as alternatives to China.
- Focus more on buying local. Something as simple as border closures have highlighted the attraction of local companies as suppliers. In our own environmental consultancy, we experienced an upturn in work as our interstate competitors couldn't cross state borders. Even our competitors from within Queensland were unable, or reluctant, to travel long distances.
- Find and use new technologies that will make supply chains much more transparent. I'm sure you will have heard about distributed technologies such as Blockchain. These are the technologies that will allow everyone to see into the murky depths of some supply chains.
Consumers are also changing. In the future, they will seek out and buy from businesses with purpose - those businesses with a strong social purpose that influences everything they do.
What are your Top 3 tips for business owners right now?
Decide if being a business owner is for you. Some of us have been badly beaten up. Some have not survived. At this point, I believe that there are good times ahead, but we all need to go through a process of questioning ourselves. Do we really want to be a business owner with everything that entails?
Get a CARDIO Plan:
In other words, get ready for the next upturn, and the next business crisis that will inevitably come after that.
Seek outside help. I know that money trees don't exist, and many of us have been through a really tough time. But getting expert help in your business is almost always the best way to save money and increase profit in the long run. None of us were born knowing how to run a business. It's a tough gig, and we all need some help along the way.
What the pandemic did was to expose weaknesses in how we organise our society and our communities.
Your reflections on the impact on your business/sector the past year?
My businesses are located in the regional Australia, and for many areas like ours, COVID 19 has actually been a business booster. For example, in our environmental company, we picked up work because our big competitors from interstate couldn't travel. Even our Brisbane-based competitors were unable or reluctant to travel. Then there are the tree-changers and sea-changes flocking out of the cities to escape.
- sky-high real estate prices
- expensive costs of living, and
The result is huge leap in regional real estate prices. I just keep wondering what will happen when the real estate prices and crowding in the popular areas reach Sydney and Melbourne levels?
How have the last few years changed businesses and how they operate?
The past 2 years have shown us the real value of resilience. We've all heard the stories about businesses that changed their business model completely - fancy restaurants doing takeaway, bakers selling bake-at-home bread dough, and so many more.
"We've always done it this way" simply won't cut it in this new world of commerce.
The other big change coming is the rise of business with purpose. For almost 60 years, we have been taught that the reason for a business is to make a profit. That's it. Nothing else. Just make a profit.
But times are changing, and that attitude is changing. Customers, investors, and employees now value businesses with purpose - those with a strong, believable "why" that has a positive impact upon society. It is no longer sufficient to have some nice-sounding words on your boardroom wall, website and in your annual reports. Today's customers and investors have a laser-like vision and can see through that thin veneer of words.
There were companies that did not exactly act with honour during the COVID-19 pandemic. We noticed. Similarly, many companies behaved badly during previous crises. Then there are those that behave badly most of the time. All these companies are on consumers' watchlists.
Of course, there were many more companies that acted with empathy and responsibility during the pandemic. These are the companies that will be remembered by their customers, suppliers and stakeholders. These are the ones that will prosper.
What today's customers, employees and investors are looking for is organisations that truly embed social responsibility into everything they do, in every part of the organisation.
Your top advice for retailers?
My top 3 pieces of advice for retailers are the same as for all businesses.
- Decide if this is really what you want to be doing.
The job market is going wild at the moment so there are alternatives. I know all about the feeling "I've failed", but that is not the case. It's a new beginning for you.
- Identify and take steps to control your business risk.
I don't know what the next business crisis will be, and I don't know when it will come to visit you, but I know with absolute certainty that it's coming.
- Use outside help.
All these changes that are happening can be overwhelming. Business with purpose, changing consumer habits, supply chain changes, new finance models, different legal requirements, social media changes... There is help out there, and you don't have to cripple yourself financially to access it. There is so much available free. Use it.
My session at Retail Therapy won't be one of those rev-you-up, inspiration-style talks that gets you all fired up but is then forgotten as soon as you get back to the realities of running your business. It will be very practical and give you some actions you can take as soon as the event is over.
- I will explain how economic booms and busts work, and how you can identify some clues about when a boom is starting, when it's exploding, when it's about to turn to bust, and when the upturn is imminent.
- I will give you a step-by-step framework to follow - with your team - that will get you to identify the bad things that could happen to your business, and what you can do about them.
- I will show you what to do with your new framework to make sure you are the prepared business, ready to be at the head of the upswing that always follows and in-tune with emerging trends and technology. (Hint: We have to look back a few decades in order to look forward).