Adapt or die
Most entrepreneurs have built-in resilience, says Matt Forrest, head of commercial marketing in Sage’s small business division. He points out that financial forecasting and planning depends on accurate data and the data is only any good if you can use it to answer those key questions such as: where is this business going, what do we need to know, and what will happen if we take this or that option?
“The impact of change on sales, payroll, HR, material resources and overheads can be seen easily if you have the right tools.” Small businesses tend to react quicker but, not having a lot of in-house technical back-up, need packages that everyone can get their heads around, he says.
The balmy days of the mid-noughties lulled many businesses into forgetting they live in a cyclical economy. The management consultant John Judge, founder of Judge 3D, has learned the importance of planning for reality over more than 20 years: “Normally I recommend reviewing a business plan every 12 to 18 months. Failure to do this means you run the risk of remaining static and being left behind.”
But just seeing the picture is never enough, he adds. “To find out if your management structures are meeting any market change you need to assess your management processes. This helps you get right down to the root cause of any problems. Like your business plan they need reviewing every 12 to 18 months.”
For owner-managed businesses there’s the endemic danger that the boss thinks he or she knows what’s best for his or her baby. Founders tend to be protective when they ought to open up, believes Lesley Meechan, director of learning and development at The GO Group.
“It’s important that key teams are brought together regularly to make the decisions regarding market trends and changes, no matter what the size of the business. Owners of small or medium sized businesses often think the responsibility lies with them to create and review growth plans. This can create an isolated perspective of the business and what it needs to do to thrive.”
Managing change
It’s rather easy for a young company to be caught out when its first downturn hits. If the management is prepared not just to tweak but to completely rethink its business model, it will have a better chance of not just surviving adversity but of grabbing new opportunities.
Partwork publisher Eaglemoss had a refined and defined business model but when Robot Wars hit BBC 2 it had the bright idea of supporting Reading University’s Cybot by letting readers of Real Robots magazine build their own, week by week – but it had to learn about component sourcing.
“The publishing house found it was now a manufacturer, and that stretched its operational resource. The top management team had to think about the impact of this idea on their business, what each person would have to do and why,” says Claire Arnold, founder partner of Maxxim Consulting, which advised Eaglemoss during this change process.
Eaglemoss was one of Arnold’s first clients: it trebled in size over 18 months, was sold, and its CEO became chairman of Maxxim. Its clients now include some very large companies, but Arnold agrees with Harry Dunleavy that change processes in corporates such as Meggitt, Smiths Industries or RBS are not significantly different from those of smaller organisations. Whether there are five or 5,000 employees, you need to have enough delegated authority.
“A plan should be about what you are going to be selling people and how to produce that stuff in a way that is most attractive to your customers. In small businesses led by charismatic individuals, if you are not careful, the plan and the vision all resides in their head and never gets passed down in any meaningful way to the next level down.”
The best managers, however, know when new blood can catalyse change. “If the founder has been there for a long time it is as if the gene pool is too concentrated or the teabag has been in the tea too long,” says Arnold. At Virgin Money, Branson has lured back Jayne-Ann Gadhia who recently hired three new people: to get to the next stage of development as a retail bank she had to get new blood into the business.
Uncharted territory
We are entering a period of fragile and unpredictable growth according to Dr Dominic Swords, the renowned business economist and author. “It’s more important than ever to keep revisiting your strategic plan. You need to strike the right balance between risk and stability – this is no time to be putting all your eggs in the China basket for example. I think the nervous markets of the last two years coupled with the significant reduction in the flow of capital caused people to take a measured approach to taking risk. It made people realise that stuff happens.”
Managers in small and medium-sized companies don’t always see strategic planning as relevant, and say they don’t have the time or resources it requires to get it done. Organisational inertia is the principal enemy of planning according to Dr Swords: massive five-year plans supported by reams of documentation are both unnecessary and likely to be shelved to gather dust.
“What you do need to do is to look regularly – and especially if you have identified important changes in your market or the economic environment – at the direction the business is moving in and its ability to compete in the marketplace.”
Change management in action
How mobile phone recycling firm ShP Limited keeps pace with a fast moving industry
Simon Walsh and Craig Smith founded mobile phone recycling business ShP Limited in a Wimbledon garage in 2002. The business has to constantly adapt to changes in the market: it works with charities, networks and manufacturers; since 2007 it keeps old iPods, satnavs and digital cameras out of landfill; and is ready to embrace white goods or any suitable ‘WEEE’ product at its 20,000 square foot workshop. Simon has led the business to achieve a £9.2m turnover by constantly reviewing the business plans to stay ahead in a very competitive marketplace.
“We go though stringent weekly, monthly and annual planning – forecasting is key for us. We are a small business so we need to know where our money is coming from. We have weekly management reviews, monthly management meetings and an annual review and strategy day at the end of December with our key management, accountants and people who have real influence on the business.”
The firm does a quick review of the year past but mainly focuses on building a plan for the coming year. “We review those plans month-on-month to make sure the figures and the markets still make sense and that we are still talking to the right people,” says Walsh. “Anyone not doing that is going to fall by the wayside if they are in a fast moving industry. And these days, who isn’t?”
Planning and change management essentials
- Be totally and completely focused on customer behaviour, which changes with people’s aspirations and expectations. If the plan is not customer-centric you are just playing with numbers
- Review your business plan every 12 to 18 months: even if you just fine-tune and refine a few things it is worth it
- Make small adjustments continuously rather than big changes annually or occasionally
- Bring key teams together regularly to make the decisions regarding market trends and changes, no matter what the size of the business
- Get your management report and management figures through by the first week of the following month so you can react very quickly
- Be prepared to change the plan – and re-engineer the business if that’s what the market dictates
