Would your business be able to cope if several of your top employees walked out tomorrow, or if your biggest client stopped working with you? With the recent EU referendum result and Brexit already having an impact on small businesses and the wider economy, it’s a strong reminder of the importance of building resilience into your business plan to limit the effect of any major risk to your organisation.
“Since launching in 2008, we’ve really focused on building resilience into the business model,” says Francesca Armstrong, co-founder and chief operating officer at Connoco Group, the parent company behind several property and hospitality brands. “For us, diversification is key within any business, whether it be market sector, currency exposure or employee skills. As a business that built itself through the recession, we have always been aware of never coasting along too comfortably but instead progressively developing and re-investing.”
Spreading the risk
One way Connoco Group has done this is by ensuring it has a diversified portfolio of clients. “For example, our property portfolio is balanced across residential and commercial and even north and south of England,” says Armstrong. “This way if one part of the business takes a hit then the rest can support it.”
“It’s always important to plan against certain external risk factors,” says Nick Telson, co-founder of nightlife discovery and bookings site DesignMyNight.
Similar to Armstrong, Telson and his team make sure that they don’t put all their eggs in one basket. “Of course you want to sign up key players in your industry but you have to make sure you are also focusing on spreading out the dependency. We work with some of the largest groups in the UK such as Fuller’s and Young’s pubs but at the same time we have hundreds of smaller companies, so much so that we have different sales teams focused on different sized clients so the spread is even. This ensures that even if a big client did leave us, while it would be a financial hit in the short term, it wouldn’t be a knock-out blow.”
Telson says that the business regularly evolves to keep up with a changing market, ensuring that DesignMyNight can cope with the competition. “We started as a discovery site, we then pivoted to take enquiries on the site and we then developed Tonic, a self-serving ticket box office. These large, strategic pillars stopped us from being ‘just another listings site’ and we now actually provide the tools that power the industry that we service.
“That means we are far more entrenched into their operations from a business-to-business (B2B) point of view and are therefore harder to be uprooted. So, what was started as a pure play business-to-consumer (B2C) media company has pivoted into a B2C and B2B software company too.”
Nurturing team talent
For Martin Adams, co-founder of tech startup Codec, one of the best ways to mitigate external risk is to build an “awesome” team.
“Smart people solve hard problems, and by nurturing a culture that thrives on innovation, nearly any external factor can be negated. A great team of smart, engaged people generates more than just interesting solutions, it creates an ethos of innovation that allows you to move quickly and adjust your business model based on market shifts.”
He also believes in creating a culture where the whole team is behind the vision of the company and working towards the same goal. “People will do their best work when they believe they’re part of a team with a worthy mission. Spend time on boarding your new employees, have strategy and team events – these things are more important than you think.”
A key risk posed to businesses is the departure of an important member of staff. “No matter what level a team member is at, we try to skill them all the same, on all areas of the business, so everyone knows how each other’s functions work. This concept of cross-learning in a team really does help if a senior member jumps ship,” says Telson. Like Adams, the company has invested in creating a strong company culture and promotes team building with a free weekly lunch and a free bar on site.
Have a plan
Tony Price, partner at PwC and leader of its My Financepartner accountancy service, says mitigating such risks requires careful planning. “If you understand your business and plan for external factors that may or may not arise, then you’re always going to give your business the best chance of taking advantage of the opportunities that change invariably brings. After all, you can’t avoid risk, but you can manage the consequences of it.”
He likens it to a game of chess. “If you consider where your pieces are on the board, where your pieces are at risk and the many current eventualities around you and a few moves ahead, then you are already well on your way to becoming resilient. Those that do this well will flourish.”
The first significant step in building a resilient business, says Price, is to take stock and make sure that you understand the whole business and business cycle inside out. “Businesses should have a clear understanding of the main risks the business faces, the dependencies on certain customers, suppliers and markets,” he says. He believes companies should also continually reassess their business, take time to reflect, and identify opportunities for growth.
“Small business owners shouldn’t view the task of creating a risk resilient organisation as their sole responsibility,” says Price. “Everyone with a stake in the success of your business has a role to play. And it’s important that business owners use the experience of those around them to develop a plan that everyone buys into. A trusted advisor, whether it’s your bank, your accountant or another professional, can be a valuable sounding board for you. They will see the good, the bad and the ugly within many different organisations so it can often be helpful to seek out their advice.”
When it comes to Brexit, Telson shrugs off any potential impact. “Luckily it shouldn’t really affect us,” he says. “We built the company during the last recession and when the economy dips, the one thing that people will always do is go out for a drink or bite to eat; perhaps even more so as other luxuries such as holidays and cars drop of the to-do list.” But like many other forward-thinking companies, they’re ready whatever storm comes their way.
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