Are you “predicting rain” for your business?
And are you ready for the tough times if they come?
After all, we’re living in some turbulent times: a war in Europe impacting the globe, sabre-rattling around China that could escalate, growing weather pattern instability (which won’t be helped by the El Niño that’s building this year), what’s likely to be an unsettling election in the world’s biggest economy next year, the after-effects of the pandemic on the global economy…
It’s always worth taking advice from Warren Buffett – rising from very modest beginnings, he’s been one of the world’s wealthiest people for decades and a leading philanthropist, too – and what he’s saying is all about risk management: it’s no good just predicting some difficult times unless you also take measures to mitigate their damage.
“Predicting rain doesn’t count, building an ark does” as he said in his 2001 Berkshire Hathaway Annual Report…
So, in these unsettled times, with persistently high interest rates and talk of a recession that just doesn’t seem to go away, what does your ark look like, what are you doing to recession-proof yourself as much as possible?
Here are the things to have on your personal dashboard:
Financial Discipline – when all’s said and done, without strong financial discipline, you’re raising your risk profile hugely.
Managing your finances covers pretty well everything from budgets to costs, expenditure and cash flow.
Do you have a zero-based budget approach, for example – not just taking last year’s budget and adding a percentage, but evaluating each item to see whether it’s even necessary?
Does your credit control team benefit from bringing your cash in early?
Do you find ways to reduce your purchasing costs? Comparing quotes from different suppliers and asking for discounts for short payment terms can be very effective, for example.
Don’t just take the default approach of so many companies – cutting all marketing and training costs and reducing staff as we’ve seen from so many companies in the past months. Rather take the time to understand these fully. You might find it’s a great time to increase spend in one, or more, of these areas to improve customer experience, team motivation and productivity, and market share, for example.
Essentially, understand the ROI from all your activities and allocate the funds accordingly.
Relationships – allied to this, of course, is really working on your relationships: customers, suppliers, staff, shareholders and other stakeholders, too.
It’s about understanding their needs, frustrations and concerns and seeing how you can address these better than your competitors. It’s about open and honest communication – after all, you’re all facing these times together.
Too often, companies focus on their customers alone in difficult times, with lots of interaction. That’s important, of course, but recognise that your supply chains could be vulnerable and securing them will keep your customers with you; your staff could be anxious and looking elsewhere or engaged in “quiet quitting” which will have a great negative impact on the business; your shareholders and other stakeholders could be worried because they’re not aware of what you’re doing and so reduce active support.
Taking a comprehensive approach to all your business relationships is vital. Not only can this help with your cost structures, but you’re more likely to have them supporting you through these tough times.
Systems – how good are your processes and systems – honestly? The longer a company has been operating, the more likely it is to have systems and processes that are done simply, “because we’ve always done it this way.”
Generally, these are inefficient and, in some cases, unnecessary or counterproductive. Where are the bottlenecks in your business? Do you have a culture that encourages people to look critically at everything, question things and find ways to do them better? This can be a cornerstone of your recognition and reward systems.
Are your processes and procedures well documented, and do you have a culture of accountability, so people are able to get on and deliver their best work?
So, what does your ‘ark’ look like, and will it cope with what could be ahead? By keeping financial discipline, relationships and systems front-of-mind at all times, you’re setting your company up for long-term success, no matter what the weather.
Don’t be like those 1500 directors of large corporations in McKinsey’s annual global board survey, which found only 7 percent believing their boards were “most effective” at risk management and only 40 percent thought they’re prepared for the next big crisis.
Build a strong ark!
Following a career spanning >50 years in the technology industry across three continents, with three decades in CxO roles leading significant, sustained growth in revenue and profitability, I now work with successful owner-led businesses to further enhance their growth, profitability and business value.
If you’d like to discuss your risk concerns, culture, board, business strategy, trends, goals, or anything else related to your business, book a free 30-minute call with me here.
I’d be delighted to talk with you.
And if you’d like to read further, these related posts might be of interest:
- “Expect the best. Prepare for the worst. Capitalize on what comes.” – Zig Ziglar
- Planning to De-Risk Your Business Against Future Threats
- Inflation – Reducing the Risks to Your Business with the 5 Cs
- “Inflation is the parent of unemployment and the unseen robber of those who have saved.” – Margaret Thatcher
- “Control your expenses better than your competition. This is where you can always find the competitive advantage.” – Sam Walton
- Success Secrets of the World’s Best CEOs
- How Resilient is Your Business? Preparing for Risk.
- From Good to Great: How Employee Recognition Can Transform Company Culture
- 10 Principles for a Sustainably Excellent Culture – Beginning With “We”
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