What can an owner do to boost small business survival?
The term “business resilience” is thrown around a lot. You’ll often hear it used in the corporate world. But it is in the world of small business where it has real significance. In fact, resilience plays a big role in small business survival.
The survival of many small businesses was threatened during our successive lockdowns. Sadly, many didn’t make it. Some businesses, though, showed remarkable resilience and overcame the odds. They survived where others struggled or collapsed.
Business resilience can be hard to identify and define. This is because it comes from largely invisible attributes. Whatever it is, there is no doubt that it is a key reason why some businesses survive in turbulent times.
All of us in business know there will be challenges along the way. At times, it might seem that it would be easier to give up and walk away. But, if you possess that magical quality of resilience, you are more likely to push through the tough times and on to success.
In general, more resilient businesses have higher survival rates and out-live their weaker competitors.
Lockdowns have exposed ways to improve your business survival.
Since 2020 we have worked with dozens of small business owners impacted by successive lockdowns. Many owners were at risk of business failure. Our job was to do whatever we could to help rescue their business.
The trouble, of course, was due to no fault of their own. Managing the fallout from the pandemic has been very challenging for all sorts of businesses. That said, the lockdowns, as difficult as they were, highlighted some key trends. Some of these lessons may help bulletproof your business.
Indeed, we found some common reasons that help explain why some businesses had greater resilience than others.
Whether you want to buy or start a business, making it as resilient as possible makes sense. After all, turning a business around can be tough. You are far better off avoiding the need for a rescue in the first place.
Why did some businesses survive and others fail?
Some businesses failed, while others survived the lockdowns. Interestingly, others made significant changes and actually grew!
For some, their market sector has been a major factor in their success or failure. However, the industry in which a business operated was far from the whole story.
What did seem to influence survival rates was the business owner themselves. And particularly how they chose to manage the crisis.
Business owners who managed to stay calm and measured generally achieved a better outcome. The leadership they displayed also had a calming influence on those around them. They seemed able to make better decisions.
Clearly, the takeaway here is that the owner of a business has a massive impact on its’ resilience and, therefore, its’ survival.
You might also be interested in this article about the personality and mindset of the business owner.
Eight characteristics that improve business survival
Good General Management
Well-managed businesses fared much better than poorly managed ones. That was the case irrespective of the industry they operated in.
Owners who had accurate and up-to-date management information could make quicker decisions. In comparison, owners with an overall lack of management ability were more prone to failure.
Often the owners that struggled didn’t have a good understanding of things such as:
- their business’ financial position or cash flow.
- how they might adapt to meet their customer’s needs both during and after a lockdown.
- the trends and opportunities appearing in the broader market.
- creative ways to adjust their pricing strategies.
Those businesses with a stronger brand presence also seemed to have better survival prospects.
We noticed a relationship between business survival and effective leadership, even in smaller businesses.
Effective leaders generally had a deep understanding of their business. Which probably went “hand in hand” with being better managers.
Those owner-leaders with good communication skills inspired confidence in staff, suppliers and customers. However, keeping morale high was a test for many people.
We noted some owners took charge and rose to the challenge of “steering” their business. Where others were resigned to defeat early in the crisis
Some individuals lacked the negotiation skills to deal with difficult landlords. As a result, they may have been unable to reduce their overheads enough to survive.
Good cash flow management
Those businesses with good cash flow management were likely to be more resilient. Likewise, the businesses with solid balance sheets and cash reserves were in a stronger position.
On the other hand, business owners with more lax attitudes and practices around finances found themselves in trouble. They often had a poor grasp of their position. This led to a degree of panic and poor decision making. Owners who had little or no cash reserves or an existing loan facility were particularly vulnerable.
Businesses with well-structured debt facilities had more flexibility during the lockdowns. In part, this allowed them to remain calm and think their way through the situation in front of therm.
Multiple income streams
Businesses with multiple revenue streams had greater prospects of survival. Similarly, recovery was more likely when a business had a wide customer base. This was especially the case when a businesses top few customers represented a small % of overall sales.
Exposure to different industry and customer sectors was advantageous. It certainly made pivoting easier. The idea of “not having all your eggs in one basket” seemed to lead to better business survival rates.
That said, where a business served a niche not impacted by the lockdowns, it often experienced growth. Think home delivery services for example.
Businesses that were already online or able to move online quickly did better during the lockdowns. A digital presence enabled some businesses to reach new markets quickly and, in some cases, thrive. Online sales maintained cash flow and importantly kept the brand active in the eyes of the consumer.
Of course, having a web presence is only one part of the solution. Those businesses able to effectively convert website visitors to paying customers were the biggest winners.
Those businesses with a strong brand identity and “raving fans” fared better than those without such a loyal customer base. These loyal customers amplified marketing and sales efforts during the lockdown. In many cases, the “fans” acted almost like a free sales and marketing team.
Better customer relationships.
Businesses were more likely to be successful when they had good relationships with their customers.
However, if the customer relationship was based solely on price, the businesses tended to be weaker.
Similarly, those businesses whose product or service solved a genuine need for their customer were often in a stronger position.
Agile business owners and pivots won the day
Owners who acted quickly at the onset of the crisis tended to do better in business rescue. Additionally, owners who were good at managing a pivot in direction were more successful than poor managers. Therefore, when a business was doing well enough to fund a pivot, the business rescue was more likely.
But, as always, Procrastination is a killer.
Tips to increase your small business resilience
- Practice good basic general management. General management is not always sexy, but it’s at the heart of any sound business.
- Build your business knowledge which in turn helps you manage better.
- Adopt an effective, positive and decisive leadership approach no matter how small your business is.
- Have good cash flow management routines.
- Create some value in your business by having a strong balance sheet and cash reserve.
- Arrange a loan or financing facility when things are going well rather than waiting for something to go wrong.
- Find multiple income streams.
- Avoid all your sales coming from a few customers as this makes you vulnerable. Perhaps aim for no more than 20% from any one customer.
- Try to have a positive and resourceful attitude that looks for opportunities.
The lockdowns were a severe stress test for many small businesses and their owner. However, such stress again showed that resilient and robust businesses have several key basic characteristics.
These are not new, trendy concepts about business survival. Rather, they are a series of attributes that have stood the test of time.
Suppose you build your business, from the outset, with these attributes in mind. If you do, you will build a more resilient business capable of surviving difficult times.
Try our Entrepreneur Personality Quiz for more ways on preparing yourself to be a successful business owner.
The information contained in this podcast is general and does not take into account your situation. The content does not constitute business, legal or financial advice and should not be used as such. You should consider whether the information is appropriate to your needs. Where applicable, seek professional advice from a financial adviser or lawyer in your jurisdiction. To find out more, please go to www.ShouldIOwnABusiness.com