Although on the face of it, SMEs and big businesses seem worlds apart, there are many valuable lessons that small businesses can learn from their larger counterparts. Their perspective and learnings can be highly relevant, especially in light of a common threat like the COVID-19 pandemic. But what can small businesses take from how large enterprises are approaching the pandemic and how can they set themselves up to navigate the economic uncertainty of the coming year?
Planning for every scenario
The last time markets saw the type of turmoil we’ve witnessed in 2020 was during the 2008 crash. That situation was very different in nature – being far more about a lack of liquidity in the system but it can offer a lot of applicable insights into how to keep your business going when growth isn’t simply baked in, and whether your staff and business are equipped to handle it.
Above all else, it served to underline the central importance of scenario mapping and having a future-looking strategy in place.
Taking Brexit as an example, big businesses will have started planning immediately for what this could mean, with multiple plans anticipating each potential outcome – many SMEs won’t be able to say the same.
Like their larger counterparts, SMEs need to put a broad strategic plan in place for any number of scenarios – looking at where they could take their business, what they need to focus on, and how they will galvanise their team. This will be incredibly beneficial in the long-term and will also be what any bank or investor asks to look at if you end up having to go to them.
It is also useful best practice to have a short-term plan for cash flow issues in general in terms of how your business will make decisive and quick actions around your cost base to preserve immediate cash flow.
Investing in the right technology
The pandemic has shone a clear light on the importance of technology. Even outside of times of hardship there are massive benefits to implementing the latest technology into the business from making processes more efficient to keeping costs down.
Once the preserve of big business, there are now a huge number of technology solutions available for SMEs that could help make their lives easier, and professionalise how they go about their finances – without breaking the bank. We know that SMEs often find it hard to produce cash flows, for example, because they don’t have a Finance Director or Chief Financial Officer so the task is typically left to the business manager. Not only may they not have the right experience but in times of a crisis the last thing they want to be doing is filling out cash flow spreadsheets. A lack of experience will also make it difficult for them to draw essential insights that could help predict future cash flow.
Basically if you’re still running off a spreadsheet or through a system that isn’t technology enabled, then it might be time to see what is available and what could help put you on the front foot – talking to your bank could be a good first option.
Surrounding yourself with the right expertise
With resource limited, one of the most significant things for an SME to consider is having the right team of advisors. It’s important that they aren’t just people who can tell you about your business today, but they are equipped to advise on the business you might become. Just as large enterprises seek advice from consultants and third-parties, SMEs need to think about where they’re going, what sort of qualities and experience they might need from an advisor, and surround themselves accordingly. Peer to Peer support can be invaluable and its worth exploring local and regional business support groups. As well as talking to your bank and other advisors on what support they have available.
For small businesses, some of the hardest decisions to make are typically that way because it’s so personal – even if it makes sense to let someone go, when the team only consists of five or six people, it can be incredibly difficult. Having an external advisor on hand is beneficial in these instances as they don’t have that personal connection and will make decisions based solely on what’s best for the business.
Knowing your value
Larger businesses will understand how they’re valued and where they sit in the market compared to competitors. This is largely because they will need to report back to investors. However, a lot of SMEs don’t have that pressure and as such, won’t look at their potential value.
In times of a crisis, having an understanding of the market, where your business fits and what is currently happening can help you make better decisions – whether that means needing to sell all, or part of, your business, if you need to acquire something new to keep up with competition, or break into a new market.
In part this comes back to how far you want to take your business in the future, and how much work you’re willing to put in to get there. Those who are able to implement new technology solutions and set up a team of advisors that matches their business’s potential, will find a refreshed ability to navigate challenges and further disruption.
The one piece that holds this all together, however, is having a strong plan in place that can be adapted as circumstances change. For SMEs, this will not only support the business now, but help plan for the future.