Planning for the long term as an SME

16 months ago, very few SME businesses were aware of the impact that a global pandemic would have on their business, and just 6 months ago many were struggling to comprehend how EU Exit would affect them. So how do you plan for these external influences?

To help our clients deal with the changes brought on by the pandemic and EU exit, we are advising them on implementing tailored Strategic Business Planning.

The importance of having a strategic business plan that considers how your business will remain resilient and manage risk through turbulent times is essential, regardless of the cause of the turbulence.

We have shared below a structure for you to consider when planning your future strategy. The most resilient SMEs undertake a clear assessment of their current business, have strong guiding principles around what they stand for, what their vision is and recognise the areas in which they can improve their current operations. It’s key to understand when to be agile and open to change to navigate the journey ahead.

Strategic considerations

Although SMEs can be more susceptible to external shock than large corporates, they usually have smaller leadership teams, meaning decisions and actions can be made more swiftly than larger competitors. Start by creating a strategic business decision-making framework based on threats and opportunities.

After the pandemic, the following questions should be on every SMEs business agenda:

  • Will my business have a positive cash flow despite a potential short-term significant reduction in sales?
  • Can I still service my customers if I am experiencing a significant reduction in my workforce?
  • What are the risks of disruption to my supply chain?
  • Can we support our staff base working remotely without disruption to the business?

But to plan strategically, it is necessary to also look at all aspects of your business.

Let's talk fundamentals

How is your market changing?

You will see this better than those outside your sector. Do people still need your service or product? Has your relationship with customers changed? List your top ten customers now, and who would fill this list in three years’ time. How will your customers' businesses be impacted by a pandemic or change in legislation? Are consumer patterns changing in your market, i.e., will technology, remote working, online shopping, or delivery logistics impact your business in future.

How resilient is your supply chain?

How dependent are you on global supplies? The Suez canal fiasco is still being felt by many businesses. Are your supplies and suppliers resilient and sustainable? The resilience of your suppliers must take account of the level of risk associated with each supplier to give a clear understanding of the resilience of your business supply chain and ability to meet customer demands.

Your employees and how they want to work

What working practices will you allow and how will your staff engage with the business and each other if working remotely? The use of different working locations should not just be about on the use and cost of office space, but also take into account the value to the business of personal communications with colleagues and customers.

In many SMEs, different roles in the business are undertaken by the same members of staff or management. How will that work in a remote environment? Would some roles be better outsourced to leave core staff members to focus on reshaping the business? Mapping the roles of all team members and how these might shift with changing work patterns could be a useful exercise.

Cash is king.  

SMEs have had a range of Government-backed loan facilities during the pandemic. Bounce Back Loans have been relatively freely accessible, while some CBILs are harder to obtain due to reluctance by the banks to release funds (despite government assurances). Regardless of where your business now finds itself, all loans must be repaid at some point.

Anecdotally, we hear that some banks are seeking full repayment once the 12 months grace period is over. Banks will understandably push for this as it will help build their capital to enable further lending outside the government schemes. There are more helpful tax reliefs available now than ever before, so if there is an opportunity, or indeed need, to reinvest to reshape the direction of your business, put a plan together ready to explain to your bank why you need to push back on your loan repayment at this time.

Your key numbers

When planning for the future and building resilience, the numbers you should be regularly monitoring are Revenue, Gross Profit, Operating Profit, and Cash Conversion. But other factors may also be worth monitoring. These could include revenue per employee, or setting a cash target to build up working capital reserves. Identify what works best for your business, how changes in those key numbers impact the business and monitor the figures regularly.

Planning and challenging your business

Thinking through the above questions and documenting your answers will help you form the basis of a strategic plan. Documenting your plans will also provide a focus for your leadership team on how to survive uncertainty in turbulent times. Having plans for alternative action in place can mean the difference between success and failure should another Brexit type situation or pandemic occur.

Being unable to act quickly, implement change, and/or manage cash flow can cause issues for businesses at present causing a lot of business failures at present. Our collective task is to survive as well as plan for recovery, succeed, strengthen profit margins, engage and retain your staff and evolve as a more resilient and agile business.

Mazars has two free tools to help with your strategic business planning: our Reshape Assessment and Brexit Radar tool. You can also book an appointment for a full Strategic Business Planning workshop in which customer value proposition is identified along with areas of strength and weakness in your business, scenario planning, and options analysis.

Whatever you decide, the important thing is to act, to make a plan - it may evolve and adapt, but it will give you a much deeper understanding of the risks your business faces and how to overcome these.

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