Small Businesses And An Uncertain Future
As small business operators, our world is impacted by uncertainty.
Sometimes, from day to day, we’re not sure of the long-term loyalty of our staff; overhead costs like rents can trend up or down quite quickly; new legislation that we had not expected can change your trading landscape.
Even as we write our annual or other short-term Business Plans, we sometimes feel unready to look too far ahead. While planning for next year may be reasonably reliable, really small businesses rarely write long-term Strategic Plans looking ahead 5 or 10 years because we feel that we are unable to reliably predict the stability of the future.
So what are we to do as small business owners trying to reach a vision of the future in as steady and as planned a direction as we can steer?
The first thing is not to let uncertainty create confusion and overwhelm.
Uncertainty is the state of things, not of our conduct nor of our behaviour. We can adapt.
There are two important ways to deal with uncertainty while trying to steer and grow your business. The first is to continue to plan, and the second is to prepare for risk-events to happen.
I do realise that Strategic Planning – long-term planning looking ahead 5 to 10 years to define where you want to go and provide broad strategies of what you should do to get there – appears costly and potentially moot if everything you plan for changes and remains uncertain.
However, it is still useful, even for really small businesses, to map out a broad idea of what you want to achieve and lay down ideas of what you might do to get there. You don’t have to enter into a month-long exercise of scoping out your industry and the environment around it, then identifying detailed strategies to move along. All you need is a fixed idea of what you want to achieve and some clear options on how to get it.
You can do it quietly over a day at the weekend when you can find a spot for a couple of hours where you are not disturbed.
Start by writing a short paragraph about what you want to achieve in your business, what is your ultimate vision?
Simply describe what you will do (sell), why you will stand out from the competition, how you will run your business so that customers will be attracted and remain loyal to you.
Perhaps if you are a small graphic designer providing graphic designs to other businesses, it may go something like this:
“My business will provide the most creative and imaginative designs for my commercial clients in posters and artwork, logos, eBook designs and other commercial artwork. I will work on my own, or with one other graphic designer, that I can take under my wing. We will work mainly from my home and receive and send material online so I’ll need a really good wifi/computer system so I can be really responsive. I want to make sure that I can satisfy all kinds of deadlines so I’ll be happy to work mad hours from time to time.”
Then, from just thinking about that statement, ask yourself where you are now in regard to that statement and what you might need to do to get there.
Our graphic designer may write:
- Most of my work is online now, and if I want to be responsive I need to stay online
- I need to get more clients so I’ll register myself on Fiverr and Upwork
- I’ll also ask my current clients for more work, and ask them for referrals to their friends
- I’ll start a Facebook page showing off my designs
- I’m going to join LinkedIn
- I’ll feel fine about working 7 days a week since I’m working from home, but if I get to where I have to work 8 hours a day every day, I’ll look for another designer
- When I find the other designer, I want someone like the person I was when I was 21
- I need to find out about good computers, graphics apps and networking/communications apps
That’s all that person had to do and they have mapped out a broad and simple Strategic Plan that will probably describe their next 5 years.
In these simple steps, they have defined what type of business they want to be. So, with that in mind, they can (and will, once the picture is in their head) focus on their desired state and in fact, subconsciously make decisions based on if what they are about to do aligns with that description.
If they are asked in the next year to take on a very lucrative in-house designer role, will they take it? Probably not if this vision is strong enough in their head.
If they have a chance to rent a cheap office space in a couple of years will they do it? Probably not because working in that space will jar with the picture in their head.
Not only that, they have written 8 ideas to get there that turn out to be broad strategies in marketing (items 2 to 5), on infrastructure (item 1 and 8) and on employment (items 6 and 7).
To get to their vision they know they need to implement three strategies:
- Market more in the online space
- Stay online and be technically excellent
- Expand human resources when set criteria have been met
The beauty of this is that it doesn’t take a lot of time, helps to clarify a thousand questions in your head about the future, really focuses you on what you have to do, and is broad and flexible enough to meet any uncertainty.
Let’s say our graphic designer did this two years ago, then last year Coronavirus hit. That was the ultimate uncertainty to all of us!
Strategically speaking, the graphic designer doesn’t have to do anything. If anything needs adjustment, it’s the timelines all this might take. They still know what they ultimately want, and they still know what they have to do to get to what they want. It’s just an adjustment in time and, possibly an adjustment on emphasis.
For example, looking at how Coronavirus hit, they are quite happy working from home but realising that with many of her potential customers in lockdown, their marketing will need to increase to get themselves more work. So, in their social media posts, they can increase posts about how graphic designs can still be produced during the lockdown, show examples of them “delivering” designs to businesses efficiently and so on. They may also decide to direct message contacts regularly, write a blog or create a YouTube channel – any way to get their services seen and known to the locked-down outside world.
The “strategy” has remained the same despite the unpredicted virus, but the execution changes to meet circumstances.
The next planning tactic to deal with uncertainty is in shorter-term Business Planning.
People think that planning of any kind lays down a path that represents certainty.
However, I’ve shown you above that planning can lay out a direction, but it can also leave the details of execution to the appropriate time. So while the direction is certain, tactical details like timing, volume, and so on can be adjusted depending on circumstances.
Shorter-term planning however allows you to deal with more predictability, if not complete certainty.
Usually, looking at your long-term desired strategic direction, you can more or less predict what you need to do and what will get in your way within the next 12 months.
I have written before about the process of Business Planning so I won’t spend too much time on the process here.
What I do want to say, however, is that having a Business Plan provides you with a framework of what to work on over the next 12 months, that is focused on the vision and the main strategies you already have in mind. It stops you from turning left and right and ultimately ending the year without progressing toward your vision.
It does this by setting out actions you have to take, based on predictions of what will happen to your products, with your customers, and in your finances (amongst other things). While it is not easy to predict what will happen to prices over the next 5 to 10 years, it is easier to look ahead a relatively short 12 months to say that you can predict the cost of materials for your product will rise because your suppliers have already had discussions with you.
Admittedly, this still does not prevent the unpredictable, like the Coronavirus from happening. You just cannot predict that.
However, having a detailed action plan in place, it is easier for you to adjust your actions when the unpredictable happens rather than make it up as you go along.
Let’s take the graphic designer again.
Having got an idea of where they want to go in the long term, at the beginning of 2020 they worked out a twelve-month Business Plan that included tactical goals and objectives such as:
- Buy the best computer and wifi system I can afford
- Go from 8 regular clients to 15 regular clients and about 25 overall for the year (that’s 10 other one-or-two-project clients)
- Achieve sales of $30,000 – $35,000 for the year
- Be on Facebook every day to increase reach and recognition – get to 300 followers by the end of the year
When Coronavirus hit in March they decided to amend their goals and objectives to:
- Upgrade the apps on my current computer system (leave expensive upgrades for now)
- Focus on my regular clients and aim to get to 15 of them (still possible through digital contact and social media)
- Achieve sales of $30,000 from the 15 regulars (get average of 4 projects per regular at $500 per project)
- Be active on Facebook weekly and pump up LinkedIn posts, and direct message any potential regular clients
As you can see their action-focus remained similar but they adapted them to meet the circumstances.
I said above that the two ways to deal with uncertainty were to continue planning and to prepare for risk-events.
You won’t be surprised that I have a process to prepare for the unpredicted, and it’s actually a planning process!
It’s called Risk Management Planning and I’ll quickly go through the process.
First, write down all the risks your business can possibly face.
Don’t edit the risks, don’t say that’ll never happen, just write everything down that you can think of from running out of cash to sickness to natural disaster or fire. Make sure you include any risks in business functions like computer processing; risks in your services and products like production processes; strategic risks like changes in legislation affecting you, and so on.
Again, it’s clear that Coronavirus may not have been predicted as a risk, but “serious illness” may have been, or “national disaster” or “some event causing an inability for us to go to the office”. If any business had made disaster plans for these last three examples, they would probably have been better prepared for Coronavirus than the rest of us!
Second, assess the risks you have listed –
- On a scale of 1 to 5, where 5 is the most likely, what is the likelihood of it happening?
- On a scale of 1 to 5, where 5 has the most impact, what is the impact to the business if it happened?
Third, isolate the risks you have identified with a high likelihood (4 and above) and a high potential impact (4 and above) and immediately work on strategies on how to manage the most likely risks with the highest impact on the business. You can:
- Avoid the risk – perhaps by removing the risky production process
- Reduce the risk – for example by providing better training or procedures
- Transfer the risk – by insuring for it or subbing the work out to a contractor
- Accept the risk and be mindful of it happening so that you can react quickly.
You can also use similar strategies to deal with the other categories of risks identified (those with lower likelihood and/or lower impact to the business.
Broadly speaking, risks that are of a high likelihood but a medium impact should be rigorously managed by reviewing and monitoring them regularly. Risks that are of a medium likelihood and a medium impact can be managed less rigorously with similar strategies, and risks that are of low likelihood and low impact may be simply monitored or accepted.
So in conclusion, while as small business owners we face uncertainty every day as we try to build the business we dreamt about and want to be proud of, there are things we can do to deal with this uncertainty.
Do not be overwhelmed.
Make sure you keep making plans – long-term and short-term – but ensure they are flexible while following a single strategic direction.
Make sure you have a Risk Management Plan and if these include strategies for disaster-management, make sure everyone knows what to do and rehearse them if necessary.
Keep on growing your businesses in uncertainty!
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