nem Business Insights - Tips & Tactics in Uncertain Times
In March this year we shared our insights of how the business landscape was emerging in a post Covid era and emphasised that businesses needed to focus on four key areas:
Concentrate on your core business where you are more likely to have a competitive advantage;
Manage cash flow as a priority and keep your bankers informed;
Look after your key people while keeping an eye out for the right people and resist hiring just to fill a position; and
Lift outbound client facing activity.
The following are some observations, tips and tactics that we have experienced while working with our clients that have assisted them to more effectively manage within their emerging business landscapes.
Core Business
We recommend that now is not the time to start looking at new products or services, or new markets. Moving into new areas can absorb cash, pre-occupy management, and distract attention from the more established areas of the business that can provide more immediate uplift in activity. The verification of the businesses competitive advantage and the identification of the most attractive existing markets can provide a far clearer focus on which areas the business should be focussed on as a priority.
Concentrating on the core business can also provide opportunities to incrementally improve many aspects of the supply chain and service delivery processes which is covered under cashflow.
Very rarely do businesses supply 100% of their customers or client’s requirements. Understanding where your business sits competitively with every customer should be the primary objective of your outbound client facing activity.
If you don’t have the ability to conduct wide scale site visits consider contact under the guise of a customer satisfaction, or business insights survey.
Manage Cash Flow
Changing your trading terms can provide a substantial improvement in cash flow. Simply changing statements to show current and overdue, and removing 30, 60 and 90 days on statements can produce an uplift.
Requiring deposits on orders, particularly for customised requirements and full payment prior to delivery is also being widely introduced, even within areas of the construction industry, such as residential works.
Many businesses have increased prices and introduced surcharges to cover cost increases, particularly in hospitality, and given the shortage of experienced staff we have seen many examples of reduced hours, reduced capacity and staggered bookings.
The entire supply chain offers opportunities. While we do not like squeezing supply partners on terms, making commitments for larger order quantities in exchange for better prices, can improve profitability without adversely affecting cash flow. And accepting more frequent but smaller delivery quantities can smooth out cash flow blips. Charging for deliveries is also more common with some even being time based.
Understanding the businesses cash flow cycle is always important and enables forecasting on a weekly and monthly basis. Reporting actual against forecast improves the understanding of the main drivers and should be visible to all major stakeholders, including bankers if there is a dependence on external funding.
The understanding of the cash flow cycle will also enable a more informed view of the cash flow implications of the entire supply chain.
Value Stream Mapping, even the simplest importing and distribution processes, can highlight bottle necks, unproductive levels of inventory and underutilised resources across processes and departments.
The improvements can be even more significant for complex manufacturing environments that rely on imported material and components. We have considerable experience over the past few years in assisting clients to replace imports with significant improvements in cash flow, productivity, quality and resulting profitability.
We are also helping a number of businesses that traditionally close for 3 to 4 weeks over December and January to reassess the necessity to do so, particularly in light of the inefficiencies that usually occur in the lead up to closure. Working with customers to understand their requirements and then employees, staff and contractors who don’t need to take leave during school holidays can maintain a businesses momentum and reduce the large cashflows swings that can occur due to extended closure.
Key People
The swings and the roundabouts also continue with the working from home trend waning with employers but still very popular with employees, particularly those that have to commute.
Interestingly, as staff are being enticed (or instructed) to be back in the office, there is an emerging trend to providing dedicated workplaces and an aversion to hot desking. Additionally, the provision of wide-ranging individual office benefits is diminishing in preference to group activities/functions that bring people back together in the office. And while all the media talk is about office jobs there are also many workplaces where working from home is simply not an option.
We have consistently found that having a flexible mind set is the most successful approach, whether it is in relation to the factory floor or the city office. Creating shifts and rosters that interlock, overlap or span longer periods can provide more flexible workplaces and can move commuting to quieter periods. We are also seeing four-day weeks emerge in retail in exchange for longer shifts across weekends and public holidays and increased leave entitlements for those that agree to work over January for example.
And then there is the continued uncertainty and alarming increases in the cost-of-living pressures that a large number of the workforce are experiencing and the resulting impact on individuals’ wellbeing. Asking your people how they are, if only anonymously, can be very enlightening and provide them with the confidence that you care. And if you do care providing them with access to an EAP (Employee Assistance Program) can be extremely effective, particularly on an ad hoc pay as you go basis, which is the preferred nem provider model.
Client Facing Activities
There is no better time than now to lift your outbound interaction with customers and clients. The quickest and most efficient uplift in business activity can be achieved with the customers you already supply goods and services to, particularly if you are seeing some softening in pipelines and activities.
Understand your competitive advantage and which markets are more attractive from a margin and growth perspective and concentrate on these first.
As outlined earlier, if you do not have the band width to cover your entire client base consider a client satisfaction or business insights survey. Our clients are constantly surprised by the positive reactions and opportunities that emerge; and this is due almost entirely to the fact that their competitors are not doing the same.
If you would like to learn more about these tips and tactics, or how they could be applied in your business settings talk to a nem Partner.
