Is your current business model fit for the future?
A robust business model can help businesses keep on track and move forward towards strategic aims and objectives. However, the last 12 to 18 months for most businesses have thrown many business models and plans into disarray.
Business models that stress test a business through scenario planning and worst case, “what ifs” may have fared better in recent times, but no one could have predicted a global pandemic, whilst navigating Brexit. Even businesses who have seen an increase in sales during this time may have changed how they operate and flexed to the way in which the world now operates – digitally and at a distance.
Our first ever SME Barometer Survey highlighted that adapting the business model is a key priority for SMEs and as the UK looks forward with businesses reopening and restrictions being lifted. SMEs may want to review their business models to ensure they are fit for the future and this new way of doing business.
Eddi Taylor, Accounts and Business Advisory Services Partner, discusses how to review your business model to ensure business resilience and growth.
Now, where and how framework
There is a simple but effective framework that can be used when preparing and reviewing a business model: now, where and how. This framework works as a roadmap for where businesses are headed. As part of any growth and management process, businesses need to first focus on where they are now. This puts a peg in the ground and allows for monitoring on improvement and change. While most businesses will dive straight in trying to fix issues straight away, it really helps to first focus on the future and where business leaders want the business to be within a certain period of time. Once business leaders understand where the business is now and where it wants to be, the path will start to appear as to how to get there and the changes and strategies that need to be implemented to achieve those goals.
Creating the business plan
To plot now using this framework, businesses should consider:
- What are the key issues and challenges facing the business and leaders right now?
- What are the urgent concerns in the business in the short and long term?
- What are the opportunities facing the business?
To plot where using this framework, businesses should consider what the vision is over a set period of time, which could be the next 90 days, 1 year, or even 5 years, and where the business will be in that time. Bullet points can summarise these aims.
An effective business model will contain the strategies involved to get from where you are now, to where you want to be, and to achieve the ambitions laid out. The strategies are the how piece of the framework. Within how there should be overall strategies to proactively focus on, and some clear and concise action points against each strategy.
It is also crucial to lay out a timeframe for these action points to be completed and who will be responsible. This will bring in an element of accountability. Bringing your team on board and giving them specific responsibilities within this can be really beneficial as they will take ownership and feel motivated to achieve the shared goals.
Reviewing a business model
It is now more important than ever to plan for the future, and business models should be constantly and regularly reviewed. Some businesses may review every six months, others may be doing so daily right now.
A 50-page business plan may be required for a bank loan, but in reality, a document too lengthy won’t be beneficial to a business owner as it will likely sit in the drawer without being reviewed, adapted, or held to account. A clear, concise business model highlights ambitions to work towards and acts as a to-do list – making it easier to tick off and adapt if required. In a world where time is the scarcest resource, we need to make these more regular check-ins quicker and simpler.
As many businesses will attest to right now, fundamental changes to your business and operations serve as a trigger point to review your current business model and how sustainable this is for the future. Regular checks of a business model also lessen the dangers of being purely reactive and changing business models in firefighting mode.
A resilient business model through scenario planning
An effective business model will stress test the business with scenarios that could impact the business and the actions that would be taken to ensure the business can adapt and remain financially viable when change happens.
One way to do this is by applying the now, where, how framework to a variety of scenarios that would impact the business, with a low, medium, and high impact.
Low severity would be minimal disruption with the ability to do business as usual. Medium severity could mean there are a few risks and sales, cashflow, and capacity would be impacted. High severity would mean a business cannot operate and may have to make difficult business decisions.
Scenario planning should run alongside the overall business model and be a key focus when reviewing the plan. Understanding what the options are at varying levels of impact can help a business remain resilient and innovative and reduces a firefighting approach should worst-case “what if” scenarios become reality.
Our teams have found this to be a really effective tool for our clients over the last 18 months. Businesses have been faced with many uncertainties and unknowns, and so planning for different scenarios has meant that business leaders have been ready with clear strategies to get through any eventuality.
Business models can help promote growth and ensure businesses remain resilient in both positive and negative scenario situations. As businesses reopen and the world looks ahead to life after COVID-19, now is a good time to review, alongside a trusted business advisor, your current business model and prepare for the future.
Our team of experienced business advisors have helped many businesses in varied industry sectors write and rewrite business models fit for the future and helped many businesses adapt their models during COVID-19. Our advisory experts can work with you to review your current business and structure, renew your business plan and help to mitigate risks and maximise opportunities for the months and years ahead.
If you would like to discuss your current business model with a member of our team who can advise on how to ensure your business model is fit for the future please speak to your usual Azets advisor or complete your details here.
Attend our ‘Business Model Review & Budget Update’ webinar
If you would also like to attend our ‘Business Model Review’ webinar on 3 Nov, please sign up here. This webinar will also include a Budget Update, highlighting the Budget impact on SMEs.