As we wave goodbye to 2020 and the dust settles on a strange old year, what can we expect in the business world in 2021? Well, that depends on a lot of things, including which industry you operate in, Government spending and what happens in the broader economy.
But I don’t want to write another article about that. What I do want is to implore you all to control the things that are “controllable”. Give yourself the best shot. That’s about knowledge and being prepared.
Take a look at the mind-map below. It’s all very simple stuff. To the left of your business are your suppliers. To the right are your customers.
Let’s think about them separately.
What is the risk to your business on the supply side? Well, if you can’t get your inputs, your sales will suffer. If your sales suffer, your cash flow suffers and well, you know the rest….
So, jump into your accounting software and identify your key suppliers (or go with gut feel – you probably know who they are). For each key supplier, put yourself in their shoes. Think about what could go wrong for them. Then think about how you can be prepared for such an event.
For example, if they fall over because they aren’t financially viable, where else can you get comparable supply? How quickly could you get that relationship up and going? Should you start spreading that risk now?
What if they can’t get the inputs they need to make what you buy from them? And what would be the cause of that? Maybe it’s a trade-war with China. That seems possible.
The cause of that sort of problem might affect a whole industry. It may not be isolated to a particular supplier. Can you do without that particular input? The automatic answer may well be ‘no’. But if you challenge that thinking, and say to yourself “Well, OK. If the answer to that has to be ‘yes’, how could we work around it?” you may well be on the path to innovation.
Yet, you may still come back to a ‘no’. In which case, how do you deal with that? Do you need to carry more inventory, for example, and what are the implications of that?
And what of logistics? Anecdotally, it’s getting harder to land product from China in Australia because the return loads just aren’t there (they don’t want our product). So, the route becomes unprofitable and shipping companies prioritise other routes.
This structured approach to being prepared can also be applied to the customer side of your business.
What do we want from them? We want them to keep on buying (and paying for) our products or services, so we need them to remain viable.
What does an analysis of your customer base tell you? Are there any particular risks? Are you heavily reliant on a handful of customers? Once again, placing yourself in their shoes, is their viability at risk because of the same circumstances (e.g. COVID) that we all face?
Of course, the analysis doesn’t end there. You can drill into it in far greater detail and with far greater sophistication than that. The point of this article is just to get you started. To cause you to undertake a process to ensure that you are prepared, come what may.
If you’ve already undertaken this process, well done! You might be surprised to know that you are in the minority. Most of your peers still have their head in the sand (which also means they have their backside in the air)!
So, let’s get cracking and stop just hoping for the best. If you would like a helping hand, give us a call. We’d love to help.