On a rough voyage, watch the horizon
Business can be very fickle. Forever at the mercy of the economy, the labour market, delays in regulatory requirements. Overlay the uncertainties caused by Brexit (sorry, I had to mention it!), and it becomes challenging, very quickly. So how do you take all this into account and still develop something that passes muster as a business plan? Whilst a fast-moving market can favour the agile entrepreneur of the start-up (at least in the short-term), how can more established companies ensure that they have a sustainable model that will adapt with the times?
If you’re a pictures-person like me, you’ll know the value in “seeing” the situation from a different perspective, so in this article, I’m going to use seafaring as a metaphor for running a business in uncertain times. If you’re a landlubber at heart, don’t worry, I’ll promise not to make you seasick!
And as a side note, if things are running sweetly for you now, remember that a good sailor will tell you that you should use any period of calm to check, and then re-check everything so that when a storm does come (and it will), you’re ready without needing to panic.
So, step number one – check the weather (market).
Before you know where you are going, you have to know where you are, and in our metaphor, that means what kind of boat we are in. Are you part of a business group, or a family company, or a sole trader? It seems obvious, but properly understanding your position will affect how realistic your goal can be – a local family-run company is unlikely to double its turnover within a few years without acquiring other businesses.
There is a decades-old process that derives from analysis of the American Air Force in Korea. The Americans could not understand why the inferior enemy aircraft could perform so well against superior US planes. The breakthrough in thinking defined the OODA loop – Observe Orientate, Decide and Act, and the first part of this -”observe” was vital. The enemy planes had a bigger cockpit canopy that allowed the pilot to see much more around him, thus they were able to orientate more quickly….and so on (For the spotters out there, this is one reason why modern jet canopies appear very bulbous).
Going back to our sailing metaphor, we often hear people talk about things “not being on our radar”. The truth is we often have often have our radar switched off, or we aren’t looking at the screen.
So step number two – where are you?
If you’ve ever been sailing, or on a ferry in rough seas, you may have heard the advice to stare at the horizon to stop yourself being sick. In turbulent times, one can say the same about business. It is very easy, and indeed tempting, to be distracted by all the noise going on immediately around you. We’re constantly bombarded by experts saying that we need to do more advertising, put content on social media; that we need to develop a niche offering; that we need to diversify; there is always something “urgent”. Now all of these things may be true, but we need to keep them in their place. Just as if we were at sea, we should be aware of the conditions around us, and even interact with them, but we must never lose sight of the horizon, or things can go bad, very quickly.
Hence step number three – don’t get distracted.
On the horizon of our business should be our goal. In our metaphorical picture, we might call this the harbour. This may not be our ultimate destination, but it could be just one of a series of places we stop at on our voyage. In the same way, our business goals could be one year, five-year or ten-year. They could all be very different, or very similar – perhaps even the same, but they all need to be realistic. Confidently stating “we turned over £10m last year, so next year we want to achieve £13m” is just noise based on ego. There is rarely a good justification for these aspirations without using hard facts, so we might more usefully ask relevant questions applicable to this example such as:
- Will the local market grow by 30%?
- Are there any large projects going through our sector right now?
- Are there any business intelligence tools we can use?
- Do we need to also increase our marketing spend by 30% or is the link between marketing and clients coupled differently?
- Do we have the staff to manage 30% uplift, and if we need to bring in more, how will that impact on cashflow and profit?
- What are the competitive threats to our business? Are other operators going to use different technologies to increase their market share?
Now, the information we gathered in our market analysis is never complete and utterly reliable. Like being at sea in a storm (at least before satellite navigation!) it may not be totally clear where you are, or what is around you. Sometimes the best guess is all that is available, but it is important to record this in order to validate the accuracy of the guess when performance is reviewed. At other times it can be relatively straightforward to find out, say, what your competitors are charging.
I’m not going to suggest what your business goals should be – there are too many sectors and many variables. But I am going to challenge you to make them SMART – specific, measurable, agreed upon, realistic and time-based.
So step number four – where do you want to be?
Getting to the next harbour (business goal) is increasingly going to feel like a race.
Understanding long-term changes will affect how your services are configured. For now, check the weather, understand where you are, and don’t get distracted but rather focus on where you want to be.
In the next article, we’ll look at how to get there.