Month: November 2022

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‘Getting an Edge in 2023’ as an SME – Part III

Part III – Business plans for growth, adopting a systems thinking approach and digitalisation for SME’s

Having an annual plan including scenario testing

Making the most of opportunities whilst shielding the business from the difficulties facing the UK in 2023 is all about adopting a positive mindset as a business owner. Confidence is needed to retain that optimism to meet the challenges ahead and a significant part of that can be derived from creating a business plan for 2023, and one which will cover the next 3-5 years.

When the future is uncertain ‘hoping for the best’ is unlikely to help. The likely influences on the business should be fully mapped and considered as a part of a vibrant plan for 2023. The SME owner is the expert in their field and in the market they are operating within, so, with a little support, thinking through some of the scenarios of the change factors operating on their business, the plan creates a necessary certainty. This should include accounting for potential decreases in income over certain timescales, accessing supply chains, considering the most fruitful trading markets and developing sustainability options. This planning will also assist business owners to examine UK approaches to funding support for SME’s and for any specific targeted funding streams.

The process of scenario testing within the plan not only releases stress, but it also unleashes creativity and leads to the development of plans to meet each scenario. This sort of thinking can be very helpful alongside a solid professional and personal growth plan for the SME owner.

An SME owner can engage their staff in some of the scenario planning and testing, this will not only increase engagement but is also highly likely to yield some fabulous new ideas.  

Planning creates certainty, open for business and open to ideas

Extracting value from the plan

The true value of an annual business plan with scenario testing is derived from the certainty that it provides that is needed to fuel the ambitions of an ambitious SME. It creates resilience at these turbulent times and it uniquely positions the SME to decide whether it is going to ‘hope for the best’ in the storm, or it is going to weatherproof the vessel and set sail ever more ambitiously. The SME owner can then consider how it looks to finance options and scenarios, including the potential to build reserves for future storms. These reviews must include pricing policies, market research of competitors and planning for a pricing policy that remains competitive but softens the blow of predicted increased costs and overheads. These plans also enable the SME to raise finance from financial institutions or from UK Government funding streams if looking toward growth to take advantage of those businesses losing trade due to an absence of planning.

Your quick summary of the benefits of your plan this year

  • Creating clarity about the way forward for the SME and its people including stating the priorities for the plan period
  • Creating contingencies for influences and opportunities operating on the business
  • Creating certainty for leaders and employees working toward established goals
  • Creating opportunities for financing using the plan
  • Creating avenues for Government funding through market scanning
  • Creating a vibrant marketing plan recognising opportunities and constraints
  • Creating a vital buffer for the potential turbulence of 2023
  • Creating a list of priorities
  • Creating a product or service pricing plan for the year
  • Creating a training and development plan for the business owner and all staff
Using systems thinking to map and refine the business

Systems Thinking

Systems thinking was first used in the private sector to drive efficiency and value in production processes. The use of systems thinking was then developed for the public sector by John Seddon and has been used more extensively to drive effectiveness and efficiency and specifically as a means to continue to deliver statutory services through the austerity period since 2010.

During the challenges of 2023 there can be nothing timelier and more useful to employ in an SME. This is a process that supports the SME owner to deliver huge financial and efficiency benefits and can be independently driven through the business and each team with the support of a business coach. The initial theory followed the resets performed within Toyota motors and harnessed innovation with no single process of performance measure being sacrosanct.

Using efficiency as the driver of every process, building the business processes from the ground based on the pure demand for the services/ products of the SME unleashes much more creativity and streamlined services that cost less and are much closer to what the customer may need. The smaller size and flexibility of SME’s makes them much more likely to yield rapid results from systems thinking than the process of turning around large conglomerates who are more like oil tankers in terms of business dexterity. Each process to deliver a service or product is carefully mapped, checked for necessity and for the value it adds which often results in a redesign creating efficiency whilst unleashing the creativity and commitment of employees getting engaged in the systems thinking process.

The challenges of 2023 are entirely suitable for rethinking and going through a deliberate process of ‘creative unlearning’. This is liberating and in many ways mirrors what many SME’s had to do during Covid in rethinking their delivery and communication platforms due to health and legal restrictions on customers and employees. In this case the creative unlearning will create a cutting edge in the forthcoming challenges and not only equip an SME to deal with constraining budgets but to examine new markets and innovative ways to service customer / client demands.

Embracing digital service delivery in all areas of the business

Digitilisation for SME’s in 2023 – UK strength and opportunity

The need for SME’s to examine greater digitalisation has rarely been as pressing as it will be in 2023 in the UK. During 2022 Ionos completed an extensive survey of UK SME’s compared to their EU counterparts to see how well the UK is positioned to capitalise on the opportunities available in the digital space. Businesses are faced with challenging supply chain crises and with major retail stock level shortfalls at their lowest since 1983 so unleashing the capabilities of automated stock management is vital. Digital service delivery and the growing use of Artificial Intelligence can support even greater SME integration into global markets by lowering transaction costs and associated transport, import and export costs. The survey of over 1000 SME’s showed that 70% see digital as the essential way to build their customer base and 63% stated that it is THE major factor for them in revenue growth. The report shows that SME’s have huge opportunities to outperform EU competitors with 80% of UK SME’s having a website, 76% having their own email connected to their domain and 64% using digital marketing through social media. This compares favourably to countries such as France with only 52% having a website and 47% using social media.

Digitalisation also supports innovation and allows SME’s to compile data and to analyse their own operations in new ways, enhancing performance.

Recent surveys by the British Chamber of Commerce show that for SME’s, digital service delivery is a pain point that they seek to maximise competitively in 2023 :-

  • 37% believe they wish to bridge gaps to manage multiple technology suppliers, contracts, and licences as they navigate 2023
  • 25% stated that their current digital tools require more investment to be competitive
  • 22% wish to improve digital data security in 2023
  • 17% want their current suppliers connectivity to be more adaptable to the changing circumstances

Another survey from the British Chambers of Commerce and Vodafone, of almost 900 UK SME’s reveals that the issues SME’s are facing managing their digital tools will require focus for 2023.

Yet despite the benefits and opportunities that digital technologies bring, many SMEs continue to lag in adoption. This means that digitalisation is a massive opportunity in 2023 requiring more flexible and innovative funding sources to be pursued to support SME’s in their growth plans.

Digital Marketing for 2023

SME’s will need to develop a greater understanding of their brand, its uniqueness and how this can be portrayed best on a number of social media and advertising platforms, including those that are emerging as greater influences of business such as Tik Tok, Instagram and LinkedIn. In 2023, it will not be possible to prosper as an SME without an adapting and growing social media presence.

One of the top challenges for small businesses in 2022 will be meeting their customer’s expectations for e-commerce. In the US a McKinsey survey published in October 2020 found that companies are three times likelier than before the pandemic to conduct at least 80% of their customer interactions online. According to this same survey, the first half of 2020 alone saw an increase in e-commerce equivalent to that of the previous ten years. This demonstrates that significant challenge such as Covid gives rise to more inventive business solutions, and this applies equally to the scale of challenge and opportunity in 2023 for SME’s. By 2024, experts estimate that online shopping will be responsible for nearly 22% of all retail purchases globally. SME’s must adapt to this challenge in the mobile space when delivering products and services.

Next week is the final part of this series of blogs creating a total plan for UK SME owners to meet the challenges of 2023. The series closes with a look at how businesses will need to recruit top talent in a highly competitive marketplace. Methods to retain their most talented people and to show greater investment in them to become SME employers of choice will also be covered. Finally the blog will discuss the evidenced benefits of coaching to business owners themselves, their teams and to the business as a whole.

For the previous two parts of this blog series see the links below…

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‘Getting an Edge in 2023’ as an SME – Part II

Part II – Tackling the economic headwinds of energy and fuel costs, inflation and raised borrowing costs

         

Creating business economic stability through a deliberate plan

This is Part II of a series of four blogs examining how SME’s can not only plan for the difficulties facing them in 2023, but potentially capitalise on some of the unique opportunities surrounding them. This series is about setting a course for growth in these times and in so doing getting ahead of the competition with a flying start to 2023. In Part I of the blog series last week the creativity of the SME owner in leading with emotional intelligence and empathy was explored. (Getting an edge in 2023 as an SME – Part I)

SME’s are the backbone of economic recovery in the UK as a whole and there is no doubt that current and future strategy will seek to support such huge hubs of enterprise. In the OECD nations SME’s make up almost 99 percent of all firms and over 70 percent of all jobs. SME’s also contribute more than 50 percent of Gross Domestic Product in high-income countries around the world.

Trading Market Opportunities

Here in the UK, inflation has now topped 10% as we look toward 2023. There is increasing strain in the labour market putting upward pressure on wages, which in itself is made worse by a distinct lack of skilled labour post Brexit. This all means that there is increased pressure on an SME’s working capital. Approaching the 2023 new year, SME owners will have to significantly balance the need to retain and attract skilled staff. This will require incentivisation whilst ensuring sufficient working capital to maintain and to grow their business operations.

For those SME’s relying on trade with the EU the Institute of Directors have found that when asking its members what would improve their business operations, overwhelmingly, they want a better and new working relationship with the EU, their biggest and nearest market.  The current political backdrop is that Government is looking for a solution to trading with Europe and the relaxation of immigration rules for skilled labour. The SME owner will have to examine trade press and Government announcements for changes in trade rules with the EU and also for national and local funding opportunities. In the SME market in 2023 then owners must also track changing markets locally and abroad that may become more conducive to their own individual SME type of business.

Sustainability as profitability and future proofing

Additionally, SMEs are increasingly environmentally aware and a survey by ‘takepayments.com’ found that 39% of business owners and leaders are passionate about making their business more sustainable. Having a sharp focus on understanding the social responsibility aspect of the SME’s individual enterprise and making this a priority for 2023 will create an edge in business. Additionally, consumers are increasingly more aware that they wish to buy from or only do business with organisations that have environmentally friendly policies. Adopting green energy and conservation policies has also been shown to be an investment that will increase customer base and ultimately place an SME in the vanguard of green friendly trading whilst potentially also becoming a part of cutting edge service provision. Legislation is already tightening on fuel sources, energy emissions and tax incentives requiring green friendly SME’s.

Preparing for 2023 to push sustainability trading makes both sound financial and ethical sense. In several areas such as the development of batteries, the UK has the potential to demonstrate business leadership across the globe. Considering how to show green credentials from the smallest beginnings such as paperless systems through to broader company energy policies will place an SME in a stronger position.

Supply chain review

Local SME supply chains

The supply chain difficulties for SME’s that were exacerbated during Brexit and Covid have also been added to by problems created by the conflict in Ukraine. With increased energy and fuel prices added to the delays, SME’s are experiencing costly and severe delays in manufacturing and shipping. However, to limit the impact of this crisis, UK SME’s can look to examine how they increase their resilience by looking at local and more accessible supply chain partners. This approach can create business marketing opportunities in the local trading arena by clearly demonstrating ‘local investing’. The supply chain can also be widened beyond the local to examine which markets may have more resilient suppliers in them and therefore be less subject to the damage of short supply affecting their trading position and their reliability for customers.  

SME’s can examine their use of automation and also the status of their trading partners in terms of the use of less dependent manual technical processes. This also applies to service providers who may want to shift to greater digitilisation and online service provision and to enhance their presence through digital marketing tools. SME’s may also want to look at timely data sharing in order to sharpen the focus of collaboration with current and potential suppliers and therefore also predict potential supply chain risks impacting on business operations before they occur.

Trust will make SME’s stand out

Supply chain data sharing and standards

Improved data sharing within their current networks and to potential markets, not only allows SME’s to improve efficiency but also increases transparency and trust. This sharing process will also encourage suppliers to share and explain all the materials and procedures that go into making and delivering their products. This information will help the SME to be confident about the supply chain, about the ethics of the suppliers on a range of ethical working practices.

SME’s also need to be more vigilant in 2023 to make sure that their suppliers have the correct accreditations and certifications. This will mean that those suppliers are bound to honour their professional associations standards which will provide better guarantees on supply and on quality. Such accreditations include ISO standards and inspection results, other examples include Ofsted inspections or CQC reviews in the education or the care sector.

SME’s countering inflationary pressure through overheads reviews

Emerse in detail to remove unnecessary overheads

Staffing approaches

The difficulties already outlined here about labour shortages and supply chain problems taken together with rising price inflation mean that SME’s have to look at cost efficiency within their operation whilst providing quality services.

Selective efficiency savings are important as there can be some unintended consequences of ill thought through and panic motivated savings. For example, cutting staffing numbers at a time when the trained labour market is stretched could result in quality and business falling rapidly due to shoddy standards. This can mean complete organisational reputational loss that lasts long beyond the pressures of a business experiencing austerity. Then in trying to get more staff afterwards, lower quality candidates requiring more training may be all that is on offer. This means that much more flexible working approaches to the current workforce may yield greater efficiencies.

Dropping the pay of personnel is also a risky process for the SME. It may result in resignations and a lower paid workforce may also lead to exploitation of individuals by unscrupulous black market staff providers. Many of my clients are working very hard to build relationships with education, colleges and training providers. This is enabling an ability to create connections with higher quality recruits who are more likely to share the values of the SME. This creates career pathways also for the individuals, and as new recruits are in training there can be some modest salary savings to be achieved. Networking with such potential sources of new people into your SME is vital.

Other expenditure reviews

SME’s can look at all overheads and compare them to the absolute necessity of them in creating their quality business product or service. This might include undertaking reviews of office space or potentially transferring aspects of the business to less expensive locations. Reviewing hybrid working policies may allow SME’s to save on overhead costs such as energy,  whilst boosting employee productivity and wellbeing. PWC report that 57% of global leaders said that they saw an improvement in their workforce performance following the introduction of hybrid working policies. Changed working policies such as shortened weeks but extended hours such as 3 day and 4 day weeks may also offer mutually beneficial solutions for some SME’s and their teams.

In Part III of this series looks at the advantages of business planning for both the SME itself and for the ways to ensure that the SME’s greatest asset, its people, are retained and that future business growth also enjoys the ability to recruit the best new people in 2023.

If you wish to know more please get in touch.

Mark at Applebright Coaching