Big Business Resilience Strategies That Small Businesses Can Borrow
As the owner of a small business, you need business resilience strategies to prepare for economic volatility and ensure business continuity. While you may not have the same resources as a large business, you can adapt and tailor key business strategies to fit your scale.
Leaders of large businesses recognize the importance of financial planning and often have specialized resources to help create business resilience strategies. As the owner of a small business, you also need business resilience strategies to prepare for economic volatility and ensure business continuity. While you might not have the same resources as a large business, you can adapt and tailor key big business strategies to fit your scale.
Successful large businesses aren't successful because they are better at predicting the future. They experience the same uncertainties as other organizations. The difference is that they can and do prepare for the unknown. They understand how essential it is to maintain employee, customer and investor confidence. And they often get asked to articulate that "playbook," so they strategize to ensure they have the money, people and efficient operations to navigate volatility.
3 big business strategies that small businesses can adopt
Big businesses often focus on three areas to ensure resiliency: cash flow management, contingency planning and operational efficiency audits. You can customize these strategies to cultivate small business resilience in any industry.
1. Cash flow management
Regardless of your organization's size, cash flow management is critical. Ensuring you can pay for rent, salary, equipment, inventory, and insurance is essential. However, you'll need to do more than just prepare for routine expenses. You'll also need cash flow resilience tactics to prepare for the inevitable bad weather.
Businesses can spend years building a positive reputation. However, in a challenging macroeconomic environment, a business can fail within just weeks or months. Even if a business doesn't declare bankruptcy, cash flow issues can result in borrowing at high interest rates or selling an asset at an inopportune time or at a suboptimal price.
Large businesses often have resources, such as credit ratings, that enable them to borrow from other large organizations at favorable rates. They also have a board of directors with oversight of enterprise risk management to identify risks a business might face. In specific industries, regulators require organizations to conduct stress tests to identify areas of vulnerability.
You may not have the same level of checks and balances, but you can use these ideas on a limited scale. For example:
- Use your history to prepare. If your business has experienced an economic downturn, use that historical data to estimate the impact on demand for the product and the potential effects on inventory, employees and customers. Think through how you can use this information to assess and prepare for future downturns.
- Ensure cash flow flexibility. Just like for personal finances, a good rule of thumb for small business resilience is to have cash set aside for a rainy day. It could be three- or six months' worth of expenses, or more.
- Review your cash management plan regularly. Doing this on a recurring basis can help ensure your cash flow continues to meet your changing needs.
- Build a solid relationship with your bank. Don't wait until the business is cash-strapped to contact your bank to discuss financial scenarios. Beyond your banker, reach out to experts in the community, including CPAs, lawyers, professional networks and organizations designed for small businesses.
2. Contingency planning
What-if planning examines both the knowns and unknowns down the road. Although few might have imagined a pandemic, organizations could consider what would happen if employees and customers couldn't physically come into stores or if inventory was delayed due to a natural disaster, or what the backup plan would be if a leading supplier went out of business. What would be the first steps to take if your IT system were breached?
Here are two steps to conduct contingency planning:
- Develop a comprehensive look at potential risks. Start with the most likely risks. If you're located in an area that experiences natural disasters, for example, what is the likelihood of a flood, hurricane, tornado or earthquake, and how would that affect the business?
- Consider what steps to take if that happens. What critical needs must be addressed, even if employees can't get to work? What is the backup process in the event of a cybersecurity breach or an IT system outage? How will you handle business necessities, like paying employees and other expenses? What steps do you need to get back up and running? Ensuring your data is backed up remotely or paying employees through direct deposit are ways to mitigate risk. Ready.gov offers small businesses resources to prepare for disasters and strategies for recovery.
Contingency planning for SMBs goes beyond disaster preparedness. It includes getting ready for future changes. For example, how will you keep the business steady if a key employee leaves? What will happen to your business when you're ready to retire? As vital as it is to consider these scenarios, that assessment doesn't always occur. Research from MassMutual indicated that, while 35 percent of organizations have initiated strategic workforce planning, only 8 percent have developed written plans.
Collaborate with your key business leaders to explore strategies for addressing the most significant potential changes. Determine specific plans to mitigate those losses, such as identifying and developing employees who can take on new roles.
3. Operational efficiency audits
An efficiently run business has more flexibility to adapt to changes. If you can identify and address wasted time and resources, you'll be better prepared to make any shifts.
Operational efficiency audits might look at several areas, such as:
- Process audits to determine how well time, effort and resources are used.
- Performance audits to measure progress against key performance indicators.
- Compliance audits that measure adherence to regulatory standards.
For each of these areas, focus on the key metrics that are most important to your organization. Prioritize addressing bottlenecks or the processes that have the most outstanding employee or customer dissatisfaction.
While it's always important to plan for the unknown, that preparation is essential during uncertain times to ensure the business's future. That said, it doesn't always have to be complicated. Conducting simple, consistent practices to forecast and plan your business can yield significant results. As a bonus, that preparation fosters trust among employees and customers, which can make it easier to recruit and retain top talent and keep customers coming back.
You don't need a large business budget to be resilient. However, by scaling key tactics, including cash flow modeling, contingency planning and operational efficiency audits, you can build business resiliency that's the right fit for you.
Small business resources
Whether you're starting your business or have already had many years of success, there are tools every business owner needs. Our complimentary toolkit includes a section on budgeting and managing cash flow, as well as one on navigating HR technology and data security. The insights there may help with your business resilience strategy now.
Download Plan, Launch, Thrive: The Small Business Owner's Toolkit today.
