The UK economy is on a rollercoaster ride and there is little to suggest that calmer times lie ahead, but even in these tumultuous periods there are steps that leaders can take to future-proof their business strategies.
As the country emerges from a pandemic and heads into what the Bank of England is describing as the longest recession since records began, many businesses are scrambling to bolster themselves against the threats that might affect them.
Among those threats are higher costs and increasing energy bills, as well as rising inflation and the war in Ukraine. Disrupted supply chains and a drive to Net Zero are further complicating matters and adding to sense of uncertainty about how the next 18 months can be navigated successfully.
However, failure to construct a data-informed business plan can leave businesses vulnerable to the threats facing them, and less agile in seizing the opportunities that change can present. Before we get into our top ten tips to help build resilience, lets first look at a few key questions to help you plan in uncertain times.
Is your business prepared for uncertain times?
An often-overlooked truth about business planning is that it is not about attempting to create absolute certainty of outcomes. Instead, it is about identifying and defining a range of scenarios, evaluating the business impact and designing potential responses. By doing this, it is possible to act quicker and build agility into a strategy and preparing as best as possible to ride the forthcoming waves and ensure goals continue to be met.
No matter what is happening in the economy and business landscape, plans are subject to the change and must be designed to be able to flex as change happens.
The current climate for UK businesses does feel particularly rocky, and the future more difficult to predict than usual, but we must remember that history shows there are always bumps in the road.
Mark Sykes, head of entrepreneurial business at BDO, said: "Planning is often not about providing certainty of the outcome, but about preparing ourselves to deal with challenges quickly as they arise. Setting a plan prepares us for action, helps us align our teams and resources, and gives us a mindset ready to take on challenges as they arise."
Is it time to dig-in or grow?
In the current climate, a hesitant approach might seem understandable with so much uncertainty in the air. After all, going for too much growth in a period of instability could leave you overstretched with debts and additional costs.
Opportunity is often present alongside challenge, with customer needs presenting themselves more clearly which can be a great opportunity for growth. However, holding back can also hamper your firm’s ability to keep investing in new products and talent, which could reduce competitive advantage or impact the overall quality of service delivery that customers have come to expect.
How can you prepare for uncertain times?
If we think of a business as a ship out at sea, heading for a destination and needing to ride any storms, then it is important to consider both the internal design of the ship and the impact of the external factors buffeting the ship.
Once you have explored all the internal considerations to be factored into your business plan, a thorough assessment of current external trends, threats and opportunities is vital.
10 practical tips for how to plan for uncertain times
Are you ready for the challenges of uncertainty? Every business will have a unique set of circumstances going into 2023, and each business leader will need to set their own priorities when it comes to business planning.
To help you focus on what matters, we have listed the top considerations to keep in mind. Our recommendations follow insights gathered from 160 businesses through BDO’s Business Lens, which covers seven key areas that businesses should consider when planning – people, processes, purpose, profit, performance, productivity and place. Across each of these seven areas, we asked businesses to score their compliance with 1 (strongly disagree) to 5 (strongly agree).
- Consider a range of outcomes and scenarios
It is remarkable how many business plans focus on a single set of outcomes, rather than weighing up alternative strategies and options. Many struggle to objectively look at external signals and data, which may suggest alternative plans are more suitable long-term. Positive confirmation bias means we can all often hold onto old strategies and products too long and miss new opportunities as they occur.
- Stay close to your customers
Despite most businesses claiming to have a focus on customer needs, the average Business Lens score for carefully managing key customers was only 3.2 out of 5. The impact of the last few years has meant that many organisations have become inward looking and with many needing to revisit their operating model in the months ahead, it is more vital than ever that you stay abreast of their activity and maintain effective channels of communication. Failure to keep close could lead to businesses being displaced from supply chains, but in-depth understanding of needs could create significant opportunity.
- Plan for things going wrong
Despite many businesses feeling proud of their ability to survive over the last few years, it is worrying that most businesses still report poor disaster recovery plans. An average score of only 2.3 out of 5 for this area suggests that most businesses are relying on intuition to survive the many challenges lying ahead. One reason for this could be that the scale of uncertainty makes it hard to plan for a multitude of scenarios, and so a solution could be to set up a non-decision making “think tank” or “advisory board”, which is designed to think around possible events and provide insight to the board.
- Remove non-profitable activities
With a score of only 2.6 out of 5, most businesses admitted to resuming pre-pandemic activities, in addition to resuming the changes brought in since. This creates a significant drain on productivity and leads to an inefficient allocation of resources and excess cost base. Objectively reviewing all business activities and ensuring they remain effective and relevant could help reduce the break-even point and boost profitability. One effective way of doing this is to rebuild business forecasts from scratch and assess whether each cost is necessary and adding value.
- Effectively monitor business performance
Surprisingly, our Business Lens shows an average score of 3.0 out of 5 in relation to the effective tracking of business performance against meaningful targets. For most, key performance indicators (KPIs) remain focused on traditional measures rather than using additional data sources available to give advanced warning around issues and trends. Effectively planned data strategies can provide insights to support fast decision making and allow leaders to adapt quickly whilst building business resilience. Simple investment into better use of management reporting systems can help improve tracking of business segments, customers, and suppliers.
- Refocus your business strategy around purpose
The rise of purpose-led cultures is gaining increased market traction, higher innovation, lower staff attrition and improved resilience. However, with an average grading of only 3.0 out of 5 when it comes to clarity of purpose and strategy, most businesses are missing out on these benefits. At a time when attraction and retention of staff is one of the biggest business challenges, this could be an easy step to differentiating in a crowded marketplace.
- Redesign your workspace to drive innovation and productivity
News headlines suggest we’re back in our offices. But are we? Data suggests the contrary, with footfall in cities showing a decline and many business leaders reporting challenges with workforce engagement and productivity. Double thinking has also led to people wanting to choose when and where they work, but then expressing frustration when other colleagues are not in when they are. It is not a simple conundrum, and mandating office time could trigger worsened staff attrition. With a average scoring of only 2.6 out of 5 for the effectiveness of physical and digital infrastructure, this remains a challenge which businesses have to resolve if they wish to compete for and retain top talent.
- Build resilience in your team
Shortage of talent is being reported by most businesses, and this can quite easily lead to lack of resilience. The lowest average score in this area of 2.4 out of 5 relates to a lack of contingency planning for the departure of key staff, with many teams excessively relying on one key person to deliver activities. It is important to invest in skills within your team, so that future talent can come through and support activities.
- Benchmark against competitors
The business landscape is making it harder and harder for firms to survive, which means it has never been so important to know exactly what you do best. Cautious spending habits among potential customers will mean that only the brands who communicate effectively and differentiate themselves from the market will make an impact. Naturally, uncertainty also leads to competitors changing what they do, which could mean a chance in market focus or the displacement others in the supply chain. Our external research and benchmarking tools at BDO help to give a different perspective on what is happening in key markets.
- Find the right advisors for your business
The expertise you bring into your business is a long-term investment, strengthening your ability to ride out any storms that might lie ahead and helping you to prepare for better times. There is no shortage of financial guidance available to businesses in all sectors and securing a trusted partner at this stage can make all the difference in the year ahead, helping you to think differently about risks and challenges, and opening your eyes to opportunities.
Are you ready for the challenges of uncertainty?
Every business will have a unique set of circumstances going into 2023, and each business leader will need to set their own priorities when it comes to business planning.
However, the 10 tips above form something of a manifesto advocating for the creation of agile strategies that offer businesses a viable path into a future where growth remains not just possible but likely.
BDO can guide your business through all these considerations and ensure your business plan is balanced, comprehensive and agile. If you want to understand how our approach to designing strategy may help you plan for success, contact your usual BDO adviser or contact Brian Murphy, Michael Jennings or Pamela Gillies directly.