The macroeconomic and microeconomic risks to your business seem to be present in every aspect of your day. From inflation and supply chain issues to trouble finding and retaining quality employees, business owners can feel overwhelmed by the number of factors that are out of their control. While this may seem like a time to rein in your expectations and focus on your survival, we believe that the four areas below will help you build a more proactive approach that can strengthen your risk management and create a pipeline of opportunities for the future.
1. Find and Focus on your Niche: Chances are, you have a specific customer/client type that you primarily work with at your firm. To discover who this client is, create a list of the customers/clients you have done business with over the last 12-18 months. Then rank these customers based on quantitative factors (such as how much revenue they produced and their specific operating margin) and qualitative factors (such as the ability to collaborate and provide referrals). It is likely that you will notice certain types of customers and clients produce more revenue and are better partners than others. Figure out what traits your "A" customers/clients possess and create a strategy to market to these types of business and/or individuals. Typically, your "A" customers/clients are less price motivated and therefore are much better partners during a difficult economy.
2. Strengthen Your Internal Value Drivers: Create a list of the activities and services that you provide. Then ask three questions about each activity or service: Is it teachable? Does it differentiate you from your competitors? Does it create customer/client loyalty? We suggest that you have each member of your management team fill out their own form individually. You can then meet to discuss each team members' responses and coordinate a strategy to better deliver your value drivers internally and externally. Building relationships creates customers/clients that are less price sensitive and therefore better able to adjust to pricing volatility.
3. Broaden and Strengthen Your Supply Chain: The pandemic provided a great stress test of any organization's supply chain, particularly if you are in an industry with high levels of inventory and/or fixed assets. Looking for new suppliers while strengthening your relationship with current suppliers is vital. Remember that your suppliers are also facing the same price and interest rate pressures, so helping them create a more sustainable business will help your sustainability.
4. Customer Education: Educating your customers about substitute products can be great for building loyalty and trust while not losing revenue. While your primary products may be extra expensive or unavailable, there are likely good substitutes. Don't be afraid to search out these substitutes and provide education to your customers as to why these products will be able to meet their needs. Once again, building relationships creates less price sensitive customers who appreciate you beyond the quoted dollar value of your goods and/or services.
We know it is tough for independent business owners in the current climate. We encourage you to keep in mind that your competitors, both large and small, are facing the same headwinds. In this negative climate, creating a proactive strategy to find and retain your “A” customers/clients while also strengthening your operations and supply chain sets you apart from your competitors who are likely spending more time focusing on how exogenous factors are negatively impacting their business.