Building Business Resilience: A Guide for SMEs in Challenging Times

Accounting | 04.09.2023

by Azets

SMEs face multiple crises, emphasizing the need for resilience. These businesses are vital for global economic growth, employing a significant workforce. However, factors beyond their control create reactive measures, hindering smooth navigation during crises. How can SMEs enhance recovery? Strengthening finances and empowering staff to adapt are key steps. Making resilience a fundamental growth strategy is crucial.

What does a resilient business look like?

A resilient business is defined by its ability to withstand and recover from all sorts of difficulties, and withstanding the slings and arrows of a fluctuating economy factors into this.

Current challenges for SME business resilience

The availability and cost of debt, including increased interest rates, remain important factors. Inflation and the overall cost base continue to rise, while the war for talent persists across sectors. The labor pool and skill sets have been severely impacted during the pandemic for the past two years. These challenges are expected to worsen in the future, and cause increased struggles for business resilience.

“I think all of those things we're talking about is the ability for businesses to forecast, and I think that's a real challenge. You see a lack of skill in smaller businesses, or looking beyond next month, the month after. In an inflationary economy and costs spiraling out of control, in some cases it's very difficult to look ahead.”
- Nick Parrett, partner at Azets UK.

Where to begin?

For leaders seeking to build business resilience, It starts with themselves, and making sure they're in a good place mentally and physically to take the business forward. They must make sure their team is around them, the senior management team, senior leadership team, and the staff; that there's constant and open communication, whether there’s 5, 50, or 500 people. Communication is everything.

“My mindset as a leader hasn't changed over the years. There's an old adage actually from an old English proverb: keep a nice shop and a nice shop will keep me. I've always believed in that.”
- Ron Wain, Managing Director of Deep South Media

How to stay mentally resilient

“Ensure you have enough time to think. Running a business can make it tempting to work really hard, believing it's a sign of productivity. However, sometimes it becomes busy work - just keeping busy without achieving real progress.”
- Nick Parrett, partner at Azets UK.

Take a step back and slow down. Everything doesn't have to be done right away. Plan carefully and have your team around you to bounce ideas off. It's essential not to go solo. Share thoughts with a fellow director, both personal and professional. It serves as an outlet, and you support each other in return.

Entrepreneurial levers to build financial business resilience 

  • Delaying creditor payments for better funding. Have a broader conversation on essential KPIs for your business model and funding needs.
  • Know your cash flow process. Key indicators, like debtor days, are crucial. Reduce this period with discounts or payment adjustments.
  • Optimize your supply chain through improved payment terms.
  • Explore equity alignment with other enterprises. Employee satisfaction, customer happiness, and social media impact medium-term outlook.
  • Invest in a good credit controller, through freelance or part-time employment.
  • The responsibility for resilience planning should rest with both the executive team and the senior leadership group. Involve advisors and accountants.
  • Stop and think. Jumping into new ventures requires careful consideration and planning; it's not something to be taken lightly.
  • Avoid single points of failure. Having only one supplier poses a significant risk. 
  • Maintain an active risk register. Review it quarterly using a simple red, amber, green system to assess how the business is performing.
  • Make succession planning a priority. SMEs should think about the medium term and ensure they have the right people in place within the business.
  • Have detailed financial figures. Know the business down to the last pound. This includes overheads, revenues, cash flow forecasts, and more.
  • Create a strong work environment. Involve your employees.
  • Outsource. Outsourcing time consuming tasks like payroll grants you more space in your calendar to focus on other things.

Maximize Efficiency and Minimize Costs: The Benefits of Outsourcing Your Payroll

“There are two fools in every market. One asks for too little, and one asks for too much.”
- Ron Wain, Managing Director of Deep South Media

The definition of success

What are your business objectives? How do you define success?

“During the pandemic, we worked with an automotive client to sell cars. They quickly focused on their website and introduced an online deposit scheme, allowing customers to secure a car with a small deposit. What initially seemed like a throwaway idea from the marketing director gained traction and became a significant driver of business. This opportunity arose as people had to stay at home, and the pivot to online proved successful.”
- Ron Wain, Managing Director of Deep South Media

The employee’s role

“Our staff here at Deep South are like weather vanes—they sense the direction of the wind, sometimes even before the senior management does. I’m fortunate to have a sage and dedicated team around me who proactively flag any issues.”
- Ron Wain, Managing Director of Deep South Media

Having such a system in place is easier with a smaller team, but it might be more challenging for larger companies with 50 or 500 employees. In those cases, it's essential to incentivize staff to look out for the company's well-being, not just out of loyalty but by offering cash bonuses for identifying potential savings or preventing crises.

Technology’s role

AI is here to stay, and its growth will continue. We must use it sensibly and accurately to avoid disinformation or misinformation. There are tools available that can reduce labor and enhance profits. SMEs need to embrace these advancements and not resist or sabotage them. The AI train has been on the track for a long time. There's no need to be afraid; instead, let's approach the conversation about business resilience with a positive outlook.

Building business resilience takes time and involves continuous improvement across finance, employees, supply chain, and technology. Personal resilience is essential too, enabling effective responses to unexpected events. Preparation involves keeping an updated risk register, reviewing it quarterly, working with trusted advisors, and incorporating regular strategy thinking time. By doing so, SME leaders can enhance their chances of surviving and thriving in the future.

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