by Dave Driscoll
Summer giving way to the harvest season always caused me to reflect on where my business was and to identify the top three initiatives to tackle in the coming year.
With vacations complete, the kids back at school, and a return to a more work-focused schedule, the time was right to formalize observations and ideas from the summer into a plan. Some years, my business was doing well and there was no need to change the strategic plan—you know, if it ain’t broke, don’t fix it.
More often, there were aspects of the business that needed attention. In today’s world, employees, client deliveries, and pricing would likely be on the list.
The obvious remedies are not always available. For example, we currently have a critical shortage of potential employees. Instead of hiring more people, managing your labor needs may require a serious look at downsizing operations, systems, and output based on what your current crew can produce, while recalibrating your business expectations accordingly.
I sold my manufacturing business in 2006. The custom products we sold were produced on equipment that needed employees to operate in an efficient manner to meet the committed delivery dates. We struggled to find employees who had the skills required. I remember managers hiring two or three people in the hope of finding that one employee who was the right fit. Today, that option isn’t possible; instead, you hope to find one solid prospect and hold your breath that they will be able to fulfill your team’s needs.
Given the production challenges we had “in the good old days,” I can’t imagine the struggles manufacturers have today to produce and deliver orders on time. Even as more automation is implemented, if you don’t have the people, the equipment does not run. Then, the schedule that was sequenced to meet customer demands must be shuffled, and the delivery commitments that were made can’t be met, which means unhappy customers.
How do you deal with such volatility and still meet customer quality and delivery expectations? The challenge becomes a choice. To meet a specific delivery date, you must pad the schedule with extra time/days to increase the probability of on- time delivery or be selective and only accept orders with the highest likelihood of a consistent on-time delivery.
Responding to a challenge may require reassignment of available employees who have the knowledge and skills needed to consistently meet deadlines. Unfortunately, that means prioritizing one segment of your business and supporting certain customers over others.
Pricing your products in an uncertain operating environment is an additional layer of strategic calculation. If you concentrate on one segment of your business to the detriment of another, can you still generate enough gross margin to cover your operating expenses and be profitable? What if you can’t?
The cascade of decisions that owners need to consider is daunting and could require a total realignment of your business, or the situation may cause you to evaluate whether you can (or want to) continue to operate the business. If you don’t want to continue to fight the battle and merely hope to survive, you may want to sell your business, merge with a competitor, or liquidate.
Wishing for a return to how things used to be and planning as if that will happen are wastes of energy. The only constant is change so every business owner must direct their company to evolve in order to survive and thrive. Proactive planning will protect your business better than trying to catch up to the curve.
Managing your business requires planning in every season. For me, Fall seemed to be the time of year when I was most inclined to reflect and plan. Being in business means constantly evaluating probabilities to make the best decisions, and it’s important to step back and look at the big picture at least annually. Strategic planning takes courage to change course and live with the outcome. Which three aspects of your business most need attention?
Dave Driscoll is president of Metro Business Advisors, a business brokerage, valuation and exit planning firm helping owners of companies with revenue up to $20 million sell their most valuable asset. Reach Dave at DDriscoll@MetroBusinessAdvisors.com or 314-303-5600. For more information, visit www.MetroBusinessAdvisors.com.
Submitted 2 years 92 days ago