With the wide-reaching impact of the pandemic, ‘normal’ seems a long way off, and growth may feel unreachable. Find out how to get your business back on track and prepare for growth without compromising stability, with insight from HSBC UK Area Director, Gareth Anderson.
Preparing for growth in 2020 looks very different. Certainly, there are options out there, but businesses need to be more cautious and guarded in their approach and clearer about the possible risks and uncertainties ahead. Now is the time to think critically and to consider the impact of macro-environmental risks on your business; to take a step back and look at different potential scenarios and the impact each would have on your business if they were to occur.
That will help create a platform for you to explore growth that allows you to play to your strengths and mitigate risk. There are opportunities out there for businesses to grow through diversification, new market opportunities, digitisation, and new customers, for example. Being able to sustain that growth, though, means having a robust awareness of the strengths and weaknesses of your business, and the opportunities and threats that the environment you’re operating in presents. There are five areas that offer businesses a roadmap for growth in this environment.
Being able to sustain … growth, means having a robust awareness of the strengths and weaknesses of your business, and the opportunities and threats that the environment you’re operating in presents.
1. People. What we’re seeing is that businesses that have a flexible and adaptable workforce are finding themselves in a much better position to grow. Historically, businesses have employed people in very defined roles, but now you need to reposition your workforce and potentially redeploy and reskill them for an environment that is more fluid, and you need a workforce that can adapt to those changes.
2. Operations. To have a stable platform for growth you’ve got to have operations that provide contingencies for a range of disruption events. There’s long been a desire, particularly in the manufacturing sector, for instance, for everything to be ‘just-in-time’ and that was fine in an environment that was relatively benign. But businesses are realising that they need spare manufacturing capacity, or a float built into their operations that enables them to adapt to disruption, so that they can pivot and spin their operations very quickly. However, it’s a fine line as that capacity consumes cash and working capital. Essentially businesses need to create a buffer of inventory and operational capacity whilst being conscious of the impact that will have on your working capital. Considering scenarios and the impact of those on your business will support that.
3. Supply chain. For businesses looking to grow, they need to be aware that they’re operating with a supply chain now that looks very different from what it was previously and it’s an area where you cannot afford to ignore the macro-trends. Deglobalisation, for example, is creating a desire on the part of many national governments to onshore. Previously low labour and manufacturing costs saw many businesses manufacturing goods in China and shipping them over to sell in Europe. What we’re now finding is that, in order to grow, businesses can’t be as reliant on that model but are looking at suppliers closer to home, and bringing raw material production onshore. These are trends that predated COVID-19, but what this has done is sharpened the risks already in the system. Balancing the security and responsiveness of your supply chain with cost is required and businesses will need to be much clearer in their plans and create a strategy that considers these issues.
You can read more about getting your supply chain ready for recovery here
4. Strategy. For many businesses, the challenges of day to day operations leave little time for thinking strategically about the future. However, even if you don’t have a formal strategy, ask yourself:
- Where am I now?
- Where do I want to be?
- How am I going to get there?
That gives you a starting point, a vision, and a plan or strategy for how you’re going to execute that. Once you have that, you can then start to overlay it with the risks and uncertainties and consider how you can mitigate those.
5. Working capital and cash. Cash is still king. Cash preservation matters, but ensuring you can create the working capital capacity and flexibility to enable you to grow will be more important than ever. That means approaching your bank with your roadmap for growth at an early stage, perhaps even before you need financing. We’ve all been focused on survival, on businesses needing funds immediately to pay their bills, but if you’re looking to grow as we start to recover, you need to have a firm handle on your working capital. Without it, you risk overtrading and that is unsustainable.
You can read more about managing cashflow for recovery here
There will always be opportunities for businesses with good management teams and strong relationships with their customer bases and suppliers, and for those who have built capacity, flexibility and agility into their operations to grow.
Overriding all this, the core message is to be bold. Think, for example, whether digital adoption could make a difference to your business, whether your products and services still meet the same need today, can you repurpose and revisit your revenue streams to capture emerging new markets? Consider what has changed over the course of the pandemic. The rise of digital is an obvious example. Most people have embraced different ways of paying for things, and the way people interact has become increasingly digitised. Consumer behaviour has shifted, the home-buying economy has grown, physical distribution has needed to pivot. If you’re a bricks and mortar business, considering how you respond to those changes could offer new opportunities for growth.
There will always be opportunities for businesses with good management teams and strong relationships with their customer bases and suppliers, and for those who have built capacity, flexibility and agility into their operations to grow. To make the most of these opportunities, be conscious of the risks but be bold in your decision-making.