Giving Your Business a Facelift (continued)
Rethinking Your Business Model
In examining your business model, you may discover that your old revenue model will no longer work. The sad truth is, it’s far easier to halt the economy than it is to start it back up again. Long-term suppliers may no longer be in business, or their own supply chain of raw materials may be disrupted. Worse, demand may outstrip supply, driving up wholesale costs.
Your workforce may have also changed. A Pew Research Center survey found in May 2021 that 66% of the unemployed “seriously considered” changing their field of work. Economists refer to this as “reallocation friction,” the idea that the jobs in the economy are either changing or are going to change, so workers are taking their time to figure out what jobs they want and what skills are needed to qualify for them.
Systems may also need additional attention, given that many were idled by temporary closures that went from weeks to months to a year or more. These may require additional maintenance, upgrades or replacement.
If your workforce is working remotely, know that some workers may not want to return to the office where they once spent their day. In an April 2021 Flexjobs survey, 65% of remote workers said they wanted to keep working from home in the future, and 58% said they would look for a new job if they would have to return to the office.
Some job functions can easily remain remote such as accounting, bookkeeping, marketing, sales and other support services. Others will need to be on-site. It’s pretty hard to build a satellite in your spare bedroom or whip up lattes for customers waiting in front of your kitchen window. You will need to experiment to find the ideal mix for your business in terms of productivity, staff equity, recruitment and retention. It may even require some changes to your compensation structure since on-site employees may rightfully make the case that they need additional compensation to cover the cost of commuting, parking and even daycare.
As you think about your revenue projections, think of ways to offset higher costs with new revenue streams. You may want to consider newer ideas like subscription models or tailor experiences and offerings to specific types of customers who are looking for something new or even nostalgic. Vacation packages are an obvious example, where you can offer special Romance or Getaway Packages that partner with local restaurants, wineries, florists or outdoor adventure companies in your community.
You may want to also think about freshening your product or service mix, trying new marketing or advertising campaigns, reallocating spending to the areas that provide the most growth, adding e-commerce to complement in-store revenue, and creating customer loyalty programs with special perks and even flexible payment terms.
Revenue is everything as you rebuild or restart. That’s why it’s important to experiment, pilot and prototype. Try something, then check the data. Keep and build on what works. End something that doesn’t and move on to the next idea. This will not only help you find new revenue but make your competitors crazy as they try to keep up with you.
To be successful, companies will have to give the operational side of their businesses a facelift as well. Disruptions to supply chains occur in the best of times, there will be additional pressures on performance in the years to come, and resilience will become a watchword for businesses that have consumed their reserves during the economic disruption and are still working on razor-thin margins.It will be more challenging to decide how and when to grow, especially when supply and demand aren’t aligned and international supply networks struggle to deal with increasingly isolationist trade policies and increased shipping costs. Regional supply chains may step in, but many of these are not mature enough to handle the volume of potential orders of an economy that is going through historically uneven growing pains.
Businesses will need to figure this out on their own. You may need to update your supply chain and source from multiple suppliers to minimize disruptions and increase your negotiating power to get more favorable terms. New digital analytics and cloud-based tools can significantly reduce the cost of building flexibility and resiliency without costing you an arm and a leg.
Controlling costs will be paramount as you rebuild or reopen. Capital and operating expenses need to be tracked in close to real-time, so you know where you are at any point in time. New tools will help you do this, compressing months into weeks or even days in determining your revenue, spend and cash flow projections. These tools will also help you project inventory so that your future profits aren’t wasting away on a shelf somewhere, waiting for a buyer.
As you update your operations, you may also want to consider more cross-training of workers to handle multiple roles in your company. Human capital is one of the biggest cost centers for a business. Cross-training allows you to adapt to changing market conditions without staffing up too rapidly, which may seriously impact your bottom line.
Keep in mind that the informal (and in some cases formal) contract between the employer and the employee has changed, perhaps forever. Saying “our employees are our most important resource” will fall on deaf ears if you fail to put their safety and wellbeing ahead of profits. Lip service isn’t going to sway anyone in the future of work. Employees want to know what the business stands for and feel part of its culture and identity. They also want a voice at the table.
Technology will continue to affect the workplace significantly and the way work is performed. Zoom is a basic example, but automation continues to make inroads into even the smallest businesses, from tools such as GoDaddy’s bookkeeping service to 3D printing. Processes that once required humans now require modest investments in technology that can be scaled as needed to fit a growing business’ needs.
Seismic shifts in the marketplace, customer demands and the competitive landscape have required businesses to refocus their efforts and invest in accelerated product development cycles, mass customization, improved environmental sustainability and personalized customer service.
Streamlining Your Organization
Pre-pandemic, change came at a more manageable pace. When the pandemic struck, many businesses had to innovate on the fly, creating new ways of doing business in days and weeks instead of months and years. Customers have become used to this and will continue to insist that you accelerate innovation and responsiveness to keep up with changing demand.
There may be a desire to go back in time, but the market may not let you. This is an excellent time to assess your company’s decision-making process. If you were able to make considerable changes to your business model to comply with public health orders, closures and new delivery models, think about the way you went about it. Clear goals, focused teams and rapid-decision making at lower levels have replaced the vertical decision-making process that has driven capitalism for centuries.
This may also be an excellent time to flatten your organization as you give your business a much-needed facelift. Multiple layers of decision-making that helped maintain the status quo pre-COVID can slow your post-pandemic business to a crawl. You want to be able to make decisions far more quickly, empower teams to experiment and become more nimble to stay ahead of your competition.
Many businesses have found that these silos were artificially created over time as the company grew and became more complex. As you conduct this management audit, you may find that you need less management than you once had as team leaders and their direct reports take on more operational decision-making.
One of the keys to gaining additional efficiencies is to focus on technologies that can make work more productive, automate systems that were once manual, use real-time data to gauge performance and make adjustments quickly and decisively.
As you make these adjustments, keep in mind the change in customer expectations. This is a good time to rethink customer journeys from an operational standpoint, streamline communications, improve customer service, and re-energize sales to meet a dynamic marketplace. For instance, dealers had to rethink the sales process from top to bottom when showrooms closed in the automobile industry. Many made fundamental changes that will outlast the pandemic, such as virtual tours of the vehicle and home delivery.
Many of the strategies born out of necessity during the pandemic will further reduce your operating costs going forward. While the near-term investment may seem substantial, the long-term return on that investment can more than make up for it since you can reduce overhead, maintenance, staffing, paperwork and recordkeeping.