Well, 2022 will go down in history as a momentous year in terms of geopolitics and global finance implications. Coming so close behind two years of mayhem wreaked by Covid 19, and the associated fall out on global supply chains and pricing, it has given stressed businesses very little time to recover and recalibrate.
The symptoms of the recent pressures will remain for a good while yet, including:
• Upward pressure on energy prices, despite falling wholesale costs.
• Continuing disruption on global supply chains, and squeeze on shipping costs.
• Lengthening lead times for supply.
• Political upheaval and pressure on wage levels to increase in line with inflation, not knowing if the inflationary impact is short, medium or long term.
• Margins getting squeezed from all directions.
With all this impacting the business environment, it is easy for business operators to get distracted and worried about issues beyond their control, and lost focus on how to respond. Looking at the diagram below, the shrewd businesses need to remain focused on what they can influence, rather than distracted by circumstances in the “Circle of Concern”
2023 Business Resilience Sphere of Influence
What lessons to take into 2023?
It is going to be tough. The cost of borrowing is high, so investing in growth and technology may be impacted. Different sectors are facing different challenges, from the retail battle between online and high street, to the supply chain pressures on manufacturing and agriculture. The year ahead may become Darwinian, with the fittest best placed to survive, but what can you do as a business owner?
Here are our top 5 tips on how to get through the turbulence, and come out the other end ready to survive:
- Work on areas you can directly influence – this makes you stronger to compete in the economic environment.
- Cash is king (and always has been!!). Work hard on ensuring bills paid on time. Look to ensure costs are covered.
- Focus on profitability – work hard on areas that can impact the bottom line, from streamlining processes and improving procurement, to improving business performance through your people.
- Remain agile – try to maintain balance between responsive service (e.g. next day delivery) and the impacts in terms of inventory (cash!!) and productivity.
- Work with suppliers and customers to understand their position in these times, and try to identify solutions that suit all parties. We’re in a period where cooperation (win/win) can bring benefits for all parties. This extends to exploring synergies with competitors – are you stronger together??
At times of uncertainty, it is wise to acknowledge the factors driving uncertainty, but there is very little you can do to make change happen at this level. Geopolitical factors will always shape economic opportunity.
Once understanding the shape of the playing field, then it is time to work on the factors you can influence and control, such as those illustrated in the diagram.
Even making changes to aspects of business you can influence will impact on processes and people. Encouraging ideas, being open to change and constant communication will be important, no matter the size of business. The benefit of working on these aspects now will lead to a leaner and fitter business when the “new normal” is established.
Our experienced team remain on hand to help. Please feel free to contact.
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