So we have finally reached the end of what appeared to be an exhausting campaign on both sides to consider our membership of the EU. The unexpected result has thrown the UK and Europe into uncharted territory in terms of the largest upheaval of the political status quo many of us have seen in our lifetimes.
The markets of shares and currency entered the anticipated state of volatility and this is probably set to continue for a short while, in the way that many of us will remember in the 2007/8 economic bust around the globe.
Although this is different, there are many similarities we can draw from, and using the lessons learned from this recent recessionary period, we can apply our business thinking even more effectively this time around.
Things we know:
The referendum is not binding on the UK government, but is in fact advisory only
Article 50 at the time of writing this article, has not yet been declared, and so we are in July 2016, still a fully paid up member of the EU, with no restrictions on trade
The timetable for negotiations is thought to be two years from Article 50 being invoked
The market volatility is indeed happening, but is not as bad as experts predicted
The UK Pound has hit a 30 year low, making our imports more expensive and our exports cheaper to our customers
Above all, we know that PEOPLE are upset, disenfranchised, and feeling vulnerable, no matter which way they voted
Things we don’t know:
We have no idea what shape the “renegotiations” will take and what the outcome will be
We don’t know if our relationship with the EU in trading terms will remain similar or change detrimentally
We also don’t know how this will affect our businesses in terms of trade and profit
We don’t know how the financial markets will react in the months ahead
We also don’t know IF the Article 50 will EVER be invoked, the referendum was “advisory” on the UK Government and not legally binding
We don’t yet understand the timeline of what I call reconciliation – within our fractured communities that is causing division and dissent across the UK
So, as a small business leader, what do you do now, and how do you react – what do you need to consider in order to properly plan?
I base this article on the lessons learned from the 2007/8 crash, and the analysis of the winners and losers from this time. If you want to be a winner then read on.
As smaller businesses, whatever happens in the months and year ahead, is pretty much out of your control, so all that can be done is to PLAN THE VARIABLES that you CAN control.
The 8 critical planning factors are:
Staff Engagement: This is a critical part of the planning process. As business leaders you need to recognise that people are emotionally led, and are probably feeling (often unspoken) very uncertain of their current and future employment position. Whenever this happens, performance and productivity FALLS. Your challenge is to ensure this doesn’t happen
Sales and Markets: Even if you believe that you are somehow not connected to the wider global picture, think again. Supply chains are often long and complex, and any reduction in spend in a much larger business, WILL affect the businesses within the supply chain. Prepare for “new business” to be a little more difficult in the short term, and reassess your existing customers spending levels with you
Finance and Margins: Fluctuations in both sales and revenue, but also in purchasing costs could impact your gross margins, and have a direct effect on your business. Rapid assessment is needed to scenario model the impact on your business.
Cash Flow: Inevitably in periods of uncertainty, customers pay a little slower, preferring to keep that cash where it can be controlled. Plan ahead by setting out your payment terms more effectively, but then consider the use of finance products such as loans and leases to sell your product, with built in cash flow. Also consider the capitalization and reserves within your business, and establish fall back cash flow sources such as business loans, or even equity injection. Don’t forget that banks are only one such source, and crowdfunding sites may also provide you with easier access to cash.
Talent and Skills: A critical lesson learned from 2007, is to retain your best talent, and take on people who are the very best at what they do. Find innovative ways to engage your people, which is not always best done via the pay-packet. Experience shows that job security and a sense of participation are top of the list in periods of adversity.
Reduction in spending: Actually, one of the worst things you can do is overreact. Don’t cull your training, marketing or investment budgets without careful thought. The most successful companies that actually GREW during the last recession, did not “hunker down”, rather strode out into the markets and grabbed new opportunities.
Efficiency and performance: As a business leader, DO conduct proper audits within your business, and discover all of the ways to reduce wastage, enhance and sharpen your sales offer, engage your staff and BE POSITIVE
Your People: You hire them for their expertise, their ideas, their commitment, so don’t brush that aside thinking the best way to plan is from the top down. The OPPOSITE is true. Utilise their brains, their ideas and their energy to draw together the business to move forwards positively and with opportunity on the radar.
As a business leader, your role is to bring together your staff, explain the planning process and give them confidence that they are able to participate in the next steps. This will in turn enhance individual and team performance, reduce wastage and procrastination, and allow your business to maximise its position within its markets and provide the best financial return to your shareholders.
There is nothing worse than uncertainty in business, and whilst it is clear that smaller businesses cannot change the macro political scene, you as a leader can at least provide the direction and confidence that protects your business, the jobs of your committed staff and the value to your shareholders.
Take positive action now. Business must go on and don’t lose the opportunity to be the best that your business can be.
Plan the outcome that you want; take control of what you can
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