Did the budget this week ease the anxiety in your business amidst the uncertainty of Brexit?
I suspect it took most of you working in SMEs less than a second to answer that, and I’m assuming that the response for many wasn’t a straightforward “yes”.
You run your own business, you’re used to tackling problems and Brexit is just another thing to consider in how you can steer your business towards enduring, profitable growth. And in our experience most businesses can find ways of delivering more if they take the time to think about it. But many SMEs don’t really think about it often enough. Can I ask you a question?
How clear are you and your leadership team on the goals for your business for the next X years?
And how committed are you to a plan to achieve them?
Focus on what you want to achieve
Some recent work with private equity backed businesses has highlighted how focussed external investors are on these questions, sometimes more so than the directors of the business themselves. And those same investors are equally interested in making sure that there are clear goals, and clear responsibilities outlined to achieve them. The nature of private equity investment requires that level of discipline to ensure that assumed growth and value is achieved within a designated timeframe for their own investors, but that discipline is just as relevant to any SME.
In fact you could say that the value of an equity partner (apart from the cash) is that they tend to demand a clarity of thinking and consistent application of effort that may sometimes be absent from small and medium-sized businesses without an ‘outside’ backer. You may not have third-party investment or need an exit strategy at this stage, but growing and increasing the value of your business will still be a priority, won’t it?
Who keeps you or your business on the straight and narrow? Who asks you those awkward questions? Who is driving you for your own benefit to be more ambitious and more structured in your approach to building a stronger business?
What questions should you be asking of your management team?
Why not start with where you’re heading:
· What is our growth target for the next X years? Is it ambitious enough?
· How do we want to grow? Where? Why?
I’ve deliberately not prescribed a time-frame – you need to have a view of what is appropriate for your business.
Then once you’re clear on those things:
· What are our key activities that will drive value in this business?
· How capable are we of delivering these key value drivers?
· What will we need to do or invest to achieve our goals?
· What is going to stop us?
The real value in considering these questions comes from the dialogue you get from involving different stakeholders in the discussion. A recent two-day meeting with one, very successful, mid-size business brought the Chairman, the non-executive directors, and leadership team all together for the first time post investment.
It made for a very rich, often challenging, but ultimately, highly productive dialogue. By the end of the session the group had clear alignment around common goals, a detailed plan of how to achieve those, and, crucially, strong common ownership of the plan and a shared purpose around delivering it. And the business achieved real clarity about:
· Key strategic questions about where and how to grow
· The most profitable areas for investment
· Their level of ambition and confidence
· Key weaknesses that had to be addressed if the goals were to be met
· Who was responsible for delivering what.
Without all of the stakeholders in the room the thinking, decisions and actions might have lacked clarity, consensus and conviction. And without the time to consider every aspect of the strategy they might never have had the chance to identify areas of danger and doubt, and make changes to address them.
What capability will you need to achieve your goals?
Although the specific requirements will differ for each business, most will identify similar themes that will enable them to continue to be agile, innovate, improve performance and grow. Typically, they will focus on:
Strategy – The right skills – to meet customer requirements, now and in the future.
People – having a strong senior team, effective first-line supervisors, and engaged employees motivated to deliver for customers.
Business’s culture – to enable high performance and future growth.
These themes emerge consistently in all the recent best-practice research on UK SME productivity, and are central to a new Productivity through People programme we’re supporting for SMEs at Lancaster University Management School. Focussing on these themes won’t, in itself, guarantee success, but evidence does show that it can make a real difference to performance and growth in SMEs.
So, I’m afraid there’s no easy antidote to the uncertainty of Brexit, but there are some positive steps you can take to develop the resilience of your business and give yourselves the best possible chance of achieving your goals for growth during uncertain times.
A clear goal, a plan, and a focus on improving capability is a pretty good place to start.
At Infinite Perspective we support more SME’s to develop this capability, so please do get in touch if you might like to find out how we can help.