Batten down hatches, sail for new waters or run for the hills?

As the long hot summer of 2022 came to an end it would have been nice to think the difficulties of the last few years were behind us.    Not a chance.

Instead, it’s starting to feel like calm, steady trading conditions are something we’ll recall with nostalgia having had to deal with Brexit, COVID, supply chain chaos, Russia’s invasion of Ukraine and now the emerging energy crisis and inflation.   Oh, and we seem to have currency, interest rate and pension issues thrown in for good measure now as well.

Spending so long in stormy waters, the choices are stark – batten down the hatches and hope for the best or try to sail for calmer waters.  With so much happening (and so quickly), doing nothing is not an option.

So many firms now find themselves in new circumstances.   There is a swathe of SMEs who never previously considered themselves “energy intensive” (where energy costs represent a high percentage of sales turnover) who now find that they are.   The prospect of huge increases in bills are making some businesses question their viability and others will have to make significant changes to survive.

Hotels, restaurants, gyms – who all must have heat to provide their offering to customers – will have to re-examine financial forecasts.   Manufacturing businesses that involve any sort of kiln, furnace or heat treatment need a complete re-think.

Higher levels of inflation and increasing interest rates will also create pressures.   The cost of materials, cost of service and cost of finance will all be pushed upward.   There will undoubtedly be wage pressures – particularly when attracting / retaining staff.

Organisations reliant on import / export have had a tough few years already with post-COVID supply chain disruption.   Now a falling value of the pound and increased value of the dollar will increase the cost of imported goods and materials.    It potentially creates a price advantage in export markets – but if input costs have increased significantly then price increases may offset this.

Conditions may be stormy – but it needn’t be cause for panic.  As crises throughout living memory have shown us, businesses and entrepreneurs always find a way – necessity being the mother of invention.   We become better at solving problems and organisations become leaner and more adaptable as a result.

Which way to turn, which direction to take – be it finding new markets, new suppliers, changing the business model or just transforming relationships with customers / suppliers – are the decisions that need thought to find a way through the storm.  At the beginning of lockdown we published two series of articles that are equally relevant today.  The Recalibrating Spend and Focus on Costs series provide advice for taking an enlightened approach to cost control.   In particular, in DIY or Do It Differently I talk about re-evaluating current business models – doing things differently – to transform costs and value.

Times might be tough, conditions may be stormy and options may seem limited.  But that doesn’t mean that there aren’t opportunities and options.   Making choices is essential – so ‘run towards problems’ and don’t choose ‘head in the sand’.