- Just because you weren’t prepared for COVID-19 doesn’t mean you shouldn’t be building up your resilience during it, to get through the crisis but also as a buffer against the next.
- Resilience is as much a tool for surviving during crises (or “shifts”) as it is for thriving.
- Leaders of SMEs and entrepreneurs must focus on five key areas of resilience across leadership, revenues, the organization, finances and operations.
There’s a proverb that goes: “The best time to plant a tree is 20 years ago. The next best time is right now.” The naturally vulnerable Small to Medium Enterprise (SME) and entrepreneur sector would have done well to build their resilience prior to COVID-19. But if they didn’t, as with so many, right now is the time to plant the seeds for short, medium and long-term resilience.
After all, the next shift is sure to come whether it is in the form of a pandemic, extreme weather, forest fires or rising seas. And we might even still be recovering from this one when it does.
Resilience requires entrepreneurs to engage in two somewhat contradictory activities: one is bouncing back from the collapse of markets, the breaking of supply chains, and the depletion of workforce capacity. The other is learning how to leap forward into markets, supply chains and talent markets where the rules for survival and success are unclear and changing.
To bounce back and leap forward, SMEs and entrepreneurs need to respond effectively in five key pillars that together form resilience. These are leadership, revenue, organizational, financial and operational. However, responding effectively depends in large part on having prepared to do so.
1. Leadership resilience
Leadership resilience is a team sport, contrary to some views of leaders as lone heroes; it requires you to fortify an entire network of relationships, taking in all your stakeholders, from your customers and suppliers to your community.
First, map out those relationships. Then rank your dependencies in order, paying close attention to those you are most dependent on for viability and growth. Third, identify those relationships that are in the greatest need of strengthening – the least resilient ones. This should not prove to be an exercise in assessing the vulnerabilities of the stakeholders themselves, rather the vulnerabilities in the relationships you have with them.
Proactively go about making the key relationships more robust, by developing communications plans and protocols and identifying information that is key for your stakeholders.
Identify and take care of your personal vulnerabilities as well, such as health or finances. Eat well, exercise, prioritize sleep and stay in touch with loved ones. Stockpile knowledge that may seem irrelevant for the short run but could become extremely useful when shifts do happen. That means: do learn that new language, develop skills in using remote platforms, study geopolitics, and so on.
Resilience is a team sport; it requires you to fortify an entire network of relationships, taking into account all your stakeholders, from your customers and suppliers to your community.
Hasty responses to shifts can create bigger problems than the shift itself. Have an action checklist up your sleeve to avoid certain kneejerk behaviors when it is time to respond. This should include points like: “Avoid talking about things returning to normal, regardless of how comfortable it makes you and others feel” and “Don’t be surprised when people behave differently.”
2. Revenue resilience
Shifts that cut off revenue streams can jeopardize your company’s very existence. Thousands of businesses have accelerated sales programs under the pandemic, but often customers perceive such sales efforts as desperate or, worse, disingenuous. This kills customer connection and engagement.
This scenario can be avoided by having prepared in advance for market shifts by initiating and nurturing resilient relationships with your customers. Have routine conversations with them that include “what if?” scenarios in relation to your product. Take a hypothetical product requiring electricity. The “what if?” could lead you to discuss power backup options. Maybe you then decide to move your sales management systems to the cloud to facilitate remote access and spread the risk of a specific location losing connectivity.
In all this, identify customer segments that might thrive during different kinds of potential shifts. Don’t neglect relationships with customers who have temporarily closed down or sharply reduced purchases (you are laying the groundwork for future sales). Equally, zoom in on customers who really need your product. Actively pay less attention to those who consider your product “nice to have”, never pay on time or are not profitable.
3. Organizational resilience
A robust organization will not only allow you to survive shifts, but will also strengthen your culture and reveal hidden depths. For example, in the present pandemic, many entrepreneurs and business owners are discovering not only the loyalty and dedication of their employees but also new emergent leaders and employees with critical but previously untapped skills. (Others are, sadly, seeing the opposite.)
Organizational resilience is not magic, so establish clear written guidelines for who makes what decisions. Then systematize the free and fearless flow of information from employees. Open information helps employees to raise red flags about potential problems confidently, e.g. sudden changes with customers or to government regulations.
The current crisis caught many business owners without an explicit plan for cutting personnel expenses, whether by workforce reduction, furloughing and/or salary cuts. While the need is still fresh, create a written plan for cost-cutting in the event of a shift. Decide how you will, or would, balance reductions in wages with reductions in headcount, getting your top team on side.
Communicate bad news clearly, concisely and with empathy. Update daily and do so with realism, transparency and honesty. Announce cutbacks or staff changes to the entire company and outline the personal sacrifices you and other leaders are making. Create a forum for discussion, and also clarify that making mistakes will not lead to retribution. At this point, serve as a role model by admitting your own.
4. Financial resilience
A surprising number of entrepreneurs and business owners leave the details of their finances to their accountants or financial advisors. This is a big mistake. The most important element of preparing to be financially resilient is to have a firm grasp on how money moves through your company. The cash flow forecast is the most important tool for doing this, and ideally one that extends at least 90 days at a daily resolution, and on a weekly resolution for 10-15 weeks following.
Cover other areas like negotiating cancellation or service suspension clauses into all future supply contracts. Equally, negotiate credit facilities with bankers and credit lines with suppliers when business is good. If you have meticulously paid suppliers on time as a norm, they will be much more open to providing flexible terms now.
When shifts do happen, introduce new payment terms for faster cash collection, providing discounts for early payments. Some customers will be struggling with their own cash flow challenges, but others will have the cash and appreciate the discount. If needed, now is the time to unashamedly request longer payment terms or discounts from suppliers, landlords and advisors.
5. Operational resilience
One of the biggest surprises of the current pandemic has been the fragility of supply chains. So map out your supply chain from raw materials to the end customer, and identify all potential vulnerabilities. Earmark primary and secondary suppliers for all critical inputs, minimizing the possibility of them having overlapping vulnerabilities.
One of the biggest surprises of the current pandemic has been the fragility of supply chains. So map out yours now.
Conduct a formal audit of your manufacturing and service logistics, and establish a written protocol for communicating with suppliers during a crisis, including something which seems basic: updated contact information.
Information infrastructure can also create vulnerabilities, meaning you should implement a data-security plan, covering areas like changing passwords periodically.
When you get early rumbles of the shift, immediately contact your suppliers — maybe even your suppliers’ suppliers — asking whether they are experiencing or might experience difficulties. Form task forces and draw upon your well-maintained communications platforms in fixing issues without delay.
Juggling all five components of resilience explored cannot be achieved without discipline and rigor. The great consolation is that not making these investments is much riskier than making them. And the very good news is that none of the practical advice in this article requires any specific expertise or expense, only the conviction that it is what must be done.