Planning for the long term as an SME

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

Whilst we don’t confess to having the answers to either the pandemic or leaving the EU, we are still helping businesses in the same way; through 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.

Here we share a structure for you to consider when planning your future strategy.  Because the businesses that succeed are not the ones who stockpiled, or who negotiated favourable contracts with suppliers/customers, or even those that have fixed the Euro or Dollar rate for 2021.

Those that succeed have undertaken 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.  They understand how and when to be agile and are open to change when required, so can navigate their journey ahead.

Strategic considerations

Although SMEs can be more susceptible to external shock than multi-nationals they can have smaller leadership teams, meaning decisions and actions can be made more swiftly than larger competitors, so start by creating a framework based on threats and opportunities. 

After the pandemic, the following questions will be on every SME business framework:

-        Will my business have a positive cash flow despite a three-month period of 20% lower sales?

-        Can I still service my customers with a 25% 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 time to look inside 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 consider the risk level associated with each supplier to give a clear understanding for your business. 

Your employees and how they want to work

What will you allow and how will your staff engage with the business and each other. It’s not just about savings on office space, but 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 does 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 loan experiences during the pandemic, with Bounce Back Loans freely accessible, but some CBILs harder to get released from the banks (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, but there are more positive 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

From an accountancy firm, we must talk about the numbers. When planning for the future and building resilience, the numbers you need to look at and monitor on a regular basis are the old favourites of Revenue, Gross Profit, Operating Profit, and Cash Conversion.  But how about adding in Revenue per Employee, or having a Cash target to build up reserves. Identify what works best for your business, how changes in those key numbers impact upon others and monitor regularly.

Planning and challenging your business

Thinking through the above questions and documenting your answers form the basis of a strategic plan.  It will also focus your leadership team on how to survive uncertainty in turbulent times.  Having options 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 cause a lot of business failures at present.  Our collective task is to not only survive but to plan for recovery, succeed, strengthen profit margins, engage and retain your staff and evolve as a more resilient and agile business. 

Mazars has 2 free tools to help with your 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.

Get in touch

If you would like to speak with a member of our SME Team please click the button below:

Contact us today