5 steps for building a resilient business

Over the course of its lifetime, it's likely your business will go through good times and bad. Some will be due to issues you can control, but all businesses at some point go through periods where market, economic or social conditions make life harder for you or your customers. In these circumstances, it’s important to focus on the factors still within your power – taking the necessary steps to make your business resilient to survive the tough times.

Gary Heywood looks at five steps you can take to safeguard your business and find opportunity when it matters.

What makes a resilient business?

Resilience is, broadly, the ability to survive challenging conditions, but it’s important to remember the big picture. Making it through a challenging period isn’t just slashing all your costs to hibernate until the market picks up – when times are tough, some businesses struggle and some survive. If you’re better prepared than your competitors, you have a chance to pick up new customers when your peers fall behind.

That’s why I advise my clients to take a balanced view to resilience planning, managing costs where needed but also leaving space for agility – tough times can yield unexpected opportunities for those ready to seize them.

1. Safeguard your cash position

‘Cash is king’ goes the old saying – when it comes to survival, cash flow is the most common reason businesses fail. If you run out of cash, it’s game over, so your first step is to understand your available runway and manage your resources appropriately.

• Look at your overheads, income and working capital and forecast at least 6 months ahead to understand where pinch points may come up.

• Work out potential areas for cash conservation, such as extending supplier payment periods, shortening debtor or liquidating spare stock to provide extra cushion.

• Think in advance about potential credit sources before it’s urgent, talking to your bank, looking at invoice finance or loans.

2. Secure your top line

In addition to managing your costs, you need to ensure your top line of revenue is stable. This starts with looking at where your sales are coming from now and making sure they’re safe for a reasonable window going forward.

• Talk to customers and make sure they’re in a safe cash position themselves to see if you can count on future orders.

• Follow up any order decreases from recent months to find ways to retain business even at a lower level.

• If your costs or income are changing, check your margins on existing services to ensure you’re not operating anything at a loss.

• Don’t cut all spend without thinking – your marketing spend may have a key role to play in keeping you top of mind for customers who will buy when conditions change, or for potential customers whose existing supplier goes under. If you’re decreasing marketing volume, work out how you can be more targeted with the remaining spend.

3. Understand your supply chain

Economic challenges often ripple beyond your immediate surroundings – if you’re sourcing internationally, check that your supply chain is in good order to keep your products moving. Shipping issues, raw material costs and production delays can leave you with empty shelves or manufacturing pauses at the time when you need to be selling.

• If you’re buying raw materials in other currencies, check that your margins on products are still within acceptable parameters.

• Talk to manufacturers to make sure they’re solvent, have enough personnel and that ports are working properly.

• Work with carriers and freight forwarders to track your costs and lead times to understand the right times and volumes for orders.

4. Empower on your people

Times that are tough for your business can also negatively impact your team, with issues such as cost of living, family members losing work or childcare issues. While your wage bill might be a tempting target for savings, remember that losing your most valuable people during a tough period will harm you much more than saving a few percentage points on your payroll.

• Review your compensation packages to ensure that they’re competitive, both in terms of remuneration and extra benefits that might benefit your team.

• Be flexible with working arrangements – if your team is struggling outside of work they may have greater need of flexible working, new working hours or technology support.

• If you’re not in a position to offer the top salaries, consider other incentives such as share schemes that align your team with the long term success of your business.

5. Stay on top of compliance

Tax and compliance can seem like a low priority when you’re facing a tough market, but a surprise tax bill is the last thing you want. If regulations are changing, now is the time to work with your advisor to understand how to manage your profits, dividends and revenue effectively.

• Plan for the best time to declare profits based on any reviews in legislation.

• Review your corporate structures to allocate income between entities, balancing losses and investment with revenue.

• Double check any outstanding benefits, reliefs and tax credits for completeness, in anticipation of any potential challenge or audit.

The support you need, when you need it

At Haines Watts, we’ve got decades of experience building the right systems and processes to support your business through its journey. Whether it’s tracking your numbers in real time, forecasting into the future or understanding your costs in detail, our experts help you turn your business information into tangible insights that drive smart decisions.

Get in touch to get the advice and support you need to build a resilient business that lasts.