Articles

Adopting Change Management Processes in your Business Plan

Post-Brexit blues

Those small business owners who coped well during the last recession could be excused for believing that it was just a question of getting back to the status quo. However…

…many have had a rude awakening after the Brexit referendum. Even before this, their markets had changed. Buyers are more cautious. They seek to secure better protection against future downturns and better prices by developing ‘preferred supplier’ lists. This requires compliance with more exacting standards relating to size, number of employees, and quality. Businesses unused to this gruelling process have a lot to learn very quickly and will require help in responding professionally and promptly.

Some examples

Government departments have become increasingly selective in their choice of suppliers. Gone are the days of ‘best value partnerships’; it is all about price and compliance. This favours larger suppliers.

Similarly, small companies heavily dependent on a small number of large customers are at great risk as they review their supply lines and centralise/rationalise their services. For example, US conglomerates have a habit of pulling out of local agreements in favour of running centralised services. If current suppliers are given the opportunity to re-tender, new compliance requirements and budgetary constraints make it harder to succeed.

How can small businesses recognise and respond to changes in the market?

Five simple steps

Monitor business performance (order pipeline, revenue, cash flow, costs, and profit on a monthly basis at a formal review meeting. Results should be compared against a three-year business plan forecast as well as an annual budget. Sounds obvious, but how many business owners do this?

Speak and listen to your customers, especially the larger ones. Try to detect any signs of possible movement in their plans that might affect you.

Prepare contingency plan for dealing with a threat to one or more of your key customers and be prepared to implement it.

Beef up your business development efforts to attract as much new business as you can to fill the possible hole in your finances should the worst happen. Take active steps to reduce your dependency on a handful of large players.

Whilst this is challenging work, it can be done – one client of mine was dependent on just one customer for 80% of his business. In just two years he has reduced this to 60% and increased turnover dramatically and profitably in so doing. His next goal is to reduce that dependency to 45%.

Consider new working practices such as:

• Outsourcing to freelance staff, enabling greater flexibility to cope with sudden surges and downturns at minimum cost. This could entail developing your own preferred list of suppliers and would require different quality control procedures.

• Review the best means of accessing larger tenders. Maybe the time has come to contact larger providers of a broad range of services and become a specialist preferred supplier to their end-customers? This approach would take time so long-term persistence is needed.

• Another route might be to develop business in more specialist, niche markets, but again such moves take time.

Act now

All businesses should review the balance of their customer portfolio and make plans to introduce new customers, or increase the volume of business from smaller customers.

After all, this is something that should be done come rain or shine. If one waits for the worst to happen it will be too late to put things right

Any business owner wishing to enhance the value of his enterprise will realise that a future buyer will consider a higher bid if he can see that the business has successfully evolved under present ownership and management.

Often an external business adviser can help by ‘holding up the mirror’ and asking the questions that would not normally occur in day-to-day operations – and by helping prepare the business for eventual exit through the production and implementation of a strong business plan.