On the brink of a global conflict, and facing a multitude of supply chain uncertainties that began with COVID-19 and have been exacerbated by the Russian invasion of Ukraine, the business community has a lot to contend with. Forecasting is particularly difficult, since it’s impossible to predict the impact of new Covid-19 variants or the ramifications of the Russo-Ukrainian War.
The pandemic accustomed us to developing contingency plans and pivoting quickly to accommodate sudden changes in policy, new variants, and supply chain issues. When it comes to driving long-term value for a growing business, however, it can be more costly to abandon plans and strategies. So, how do you drive predictable growth in an unpredictable market? There’s no sure-fire path, but here are some tips.
Assess your business from the inside out
Take a deep look at your existing revenue and product lines, and run traditional financial assessments so that you walk away with a clear understanding of margin, ROI and supply and demand, among other variables. This will help you identify opportunities where margins are high and the addressable market is broad. Crucially, it’s also essential to identify concentration risks and any potential volatility of revenue or sales. Wherever it is possible to reduce reliance on a small set of products or customers, or products or customers that are seasonal or highly geared to things outside of your control, it will provide further stability to your growth.
Assess your business from the outside in
Start by identifying your biggest asset or strength. Maybe it’s foot traffic, a specialization or knowledge of a particular business or consumer segment. Maybe you have another key differentiator. Are you maximizing that asset or strength? Can it be leveraged in a new way that is additive or complementary to existing revenue lines?
As part of this exercise it is important to look at your competitors’ business lines. Are they doing anything you could do, too? Then zoom out even further. What are comparable companies in your industry doing? What about other companies in different fields or industries entirely? This process will give you a different perspective on your own business, and in my experience, it often helps clarify overlooked opportunities.
Invest in evergreen areas of the business
While no area of a business is impervious to market changes, there are certain areas where opportunities are large enough that even a significant reduction would allow for sizable growth. It’s a good time to double-down on investing in these areas over more speculative products and services, or those that are more dependent on variables outside of your control.
Focus on diversification
Each business has key capabilities and resources that go into creating the product(s) it offers. This is true whether you’re a bakery or a consultancy. Assessing how those ingredients can be used to create new products or opportunities is always important, but especially so during periods where a business is facing challenges. Quite often, there are new ways to use those same resources to create a new or different product that may have a larger market or margin.
A simple example might be a bakery that specializes in cakes. The same ingredients and skills required to make a great cake can be applied to making great cookies, cupcakes or any number of other baked goods. A bakery can also create cooking content (recipes, social videos, etc).
Revenue diversification is often most pronounced when your largest revenue or business line is suffering. That’s why it is critical to always seek to develop new revenue lines. Often, when a business is performing well, the need to diversify is overlooked, because your biggest revenue line is itself growing. But if you plan and invest in new revenue lines during these periods, the new business lines often grow or remain stable while your primary business line decreases in size. It’s times like these that show the real power of diversified revenue lines and how they support stable and predictable growth.
Eliminate stressed business lines
Just as it is important to invest in new opportunities when times are good, it is important to recognize when a revenue line is facing an industry or market challenge. You’ll want to build a plan to ensure your new revenue lines get the resources they need to really grow and thrive, even if it is at the expense of your larger revenue line which is challenged. In my experience it is almost always better to cut more deeply in business lines that are stressed, so you can allocate additional resources to your newer business lines that are growing.
Changing the structure of your business is challenging. There are many inputs (economic, industry, the financial position of your company, etc). Be careful to assess the peripheral impacts changes could have on your business.
It’s the complementary nature of products that drive overall business performance and predictable growth. It is critical to innovate, adapt, diversify and allocate resources efficiently, while keeping in mind the complementary qualities your business lines have and rely on.
While we grow accustomed to uncertainty, it’s important to focus on what we can control: assess the business with open eyes, make cuts when they’re necessary, and invest in growth areas. Don’t forget, virtually all industries are adapting to swift changes and there are opportunities for shrewd leaders who put in the work.