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The Brexit vote is just behind us, and the U.S. presidential election still lies ahead. Understandably, many business owners are left wondering how these global political and economic events will affect their companies. While we can’t predict the future, we can plan for it. Small- and medium-sized businesses must prepare to handle whatever might come their way, especially if they’re looking to expand during tumultuous times. Right now, the only certainty is uncertainty.
Related: In a Sea of Economic Volatility, Financial Stability is Needed More Than Ever
When times are tight or the path is particularly unclear, we typically advise our business clients to stay lean and focus on their core products and services. It starts with getting back to basics: Look at your business and operating models.
Focus on core business.
First, let’s talk about core as it relates to your business model. What is your main product or service? How is it aligned to the present market? Who are the other players in the market? What is your competitive advantage?
To hold your market share in an increasingly competitive market, sticking to what you do best will help maintain focus on serving the customers you’ve already earned and potentially attracting new ones. If the economy takes a turn for the worse, some of your competitors may find themselves financially over-leveraged and unable to wait out a downturn. If you’re operationally and financially prepared to weather the changes when your competitors are not, you might even have an opportunity to grow. In the process, you’ll take out players who’ve become weaker in the short term.
Related: The State of Courage in American Business
Because expanding with new products or service lines can be especially risky in an uncertain climate, we usually recommend clients stay close to their strengths. However, if your business has an aggressive growth plan and you see an untapped market opportunity, it might be a strategic time to invest. Bear in mind, though, if a dominant player already has penetrated that new market segment, she or he will be doubling down to retain gains. You’ll have to work even harder during tight times.
Keep operations lean.
Next, to stay lean, examine your operating model. There are two primary ways to keep your operations lean: cutting costs and improving efficiency.
Do you have a good handle on all of your business expenses — large and small? You’ll need a solid understanding of how you spend all your money if you hope to identify savings opportunities.
Cost-cutting tactics could include:
- Renegotiating vendor contracts
- Putting major expenses out for bid again
- Reducing facility or office rental costs, including downsized or renegotiated leases
- Reassessing staffing needs, identifying redundancies and considering a shared-services approach
- Re-evaluating your equipment and supply needs
- Consolidating and/or outsourcing some functions, such as accounts payable
- Improving cash management and optimizing your cash flow cycle
- Talking to your CPA about potential opportunities for tax savings
The added insight you gain during this discovery process could enable you stay competitive by adjusting pricing as needed. And improving your cash position can help provide the cushion you would need to survive a potential downturn.
Related: 5 Suggestions When Reducing Costs is Your Only Option
As you look for ways to improve efficiency, think about which processes you could automate and which steps you could streamline. Does it make sense to combine any positions? Can you use your current technology to improve or automate any processes? Do you have access to the data and reporting you need to identify operational inefficiencies, or could you benefit from outside expertise?
Don’t forget to evaluate the risks when you streamline process steps or cut costs. Understanding the balancing act between risks and returns is key. For example, consolidating functions in some cases may introduce internal control issues, putting your company at higher risk for fraud.
Economic uncertainty is not necessarily a bad thing. In fact, it can present opportunities for businesses that are prepared. Stick to your core products and services and keep your operations lean to better position your company for whatever lies ahead.
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