With the outbreak of the Coronavirus, there have been a lot of serious concerns about the impact the virus will have on the bottom line of many franchise or bricks and mortar retail businesses. In particular, the effect the outbreak will have on the supply chain.
Business owners need to be forward-looking at all times. Not only when there is the threat of a pandemic breakout, but when there is a threat in any aspect of your business.
Becoming a forward-thinking business owner is vital when you are running a business. Having a contingency plan in place at all times is crucial.
Without Vision the People Perish
Becoming a forward-thinking entrepreneur requires you to look ahead at the landscape in and out of your industry so that you can make decisions ahead of time. You don’t want to be left behind like Blockbuster who didn’t embrace the future fast enough and was put out of business by Netflix.
The reason many business owners do not want to do future planning is the fact that forward-looking means that you need to deal with uncertainty. Forward-looking means that the events may be different materially from actual results, forecast or projection. Forward-looking means you have to be willing to accept the idea that the good times won’t last forever.
Sometimes it’s easier to project sales and revenues because it is more exciting and everyone loves GROWTH!
Finally, most business owners are caught up in the day-to-day of running their business that they do not spend time working ON their business.
Be a Visionary
In all the businesses I have ran, my ability to look ahead and predict the future of the industry I am in has helped me to make strategic decisions in terms of when I should exit or sell my companies.
The bottom line is, there has been an increase in the number of outbreaks across the globe. This includes Zika, SARS, and Ebola just to name a few. The likelihood of another disruption is high. If not a pandemic, it may be floods, fire, water crises and cyber or data fraud/theft.
Here are 5 key areas to focus on when you are looking at future planning and immunizing your business:
1. Anticipate Change: The ability to anticipate change in consumer preferences and the trend is part of being a business owner. Paying attention to the changes in what your customers need is important. In the case of Blockbuster, what their customers need was to watch movies and eat snacks in their homes versus being charged late fees for DVD rental.
Start thinking about what the trickle-down effect may be for your business. If you rely on a small number of significant customers, you may feel the impact on your revenues.
For example, if you own a restaurant that relies on traffic which comes from the nearby school. If the school is closed, what alternatives do you have?
One way to get prepared is to collaborate with food delivery companies such as Uber eats, or Skip the Dishes. This ensures that delivery continues in case business is interrupted.
2. Managing Inventory – Have a secondary back up plan for inventory in relation to customer demands and political or climate factors. Check to see what you have on hand, and pay close attention to how long you believe the supplies will last.
This is also a time to manage cash flow because the price of products may increase because supply is low. Business owners should take these times of uncertainty to implement cost reduction initiatives.
3. Volatility in the price of raw materials – When I owned my jewelry business, the majority of the products were made with.925 sterling silver jewelry. Like gold, the price of silver is driven by market demand. When the price of silver skyrocketed, we had to have a solution. As a result, we had to deal with sourcing other materials and introducing other product lines to offset the price of the silver jewelry.
If the products that you are selling relies on commodities, such as cotton or oil, and the price will rise or fall depending on the market, put a plan in place to have alternate strategy to solve that problem.
4. Dependence on key Suppliers – When creating a strategic plan, take into consideration who your suppliers are. Putting a plan in place to maintain an uninterrupted flow of goods at all times is important in future planning.
Having only one key supplier can knock you out of business very quickly. I learned about this when I owned a chocolate store. Diversifying suppliers and products will immunize you and your business against any virus or disruption that happens in your business.
5. The impact of PESTEL – Coronavirus is not the only thing business owners should be concerned about. If your products are made or imported out of the country, you may have several factors to be concerned about.
PESTEL analysis focuses on the six principal components of strategic significance in the macro-environment. Depending on the industry you operate in, some factors may have more relevance than others.
The six components are Political Factors, Economic Conditions, Sociocultural Forces, Technological factors, Environmental Forces and Legal Factors. For example, motor vehicle companies must adapt to their strategies to customer’s concerns about the environment. While if you are in the restaurant, sports, and fitness industry, you would have to pay special attention to changes in lifestyle and eating habits.
As business owners, you need to be able to see opportunities and potential pitfalls in order to adapt to the changing landscape.
How is the coronavirus affecting your business and industry?