Close to 12 months ago, our business experienced a significant challenge when a $30 billion large mining project here in South Australia was delayed indefinitely. Close to $1 million of work that had been identified in our pipeline was to come from this project ranging from assisting companies with their anticipated growth that would come from their business operations and people through to assisting companies to bid to win significant large projects themselves or through partnering opportunities with other companies. Other work was direct opportunities and contracts with the mining company that literally overnight were now not proceeding.
When the decision was made, it meant that along with other companies we had lost a lot of anticipated opportunities for work for our existing staff and future growth. It also had other impacts including a significant drop in confidence in the local economy, reluctance for other expenditure in the SA economy to proceed along with a re-evaluation of where our focus needed to be. It was a challenging time and one that I now reflect on in terms of lessons learnt for our business. This included making some difficult decisions on staffing and structure which is hard for any business owner.
What is ironic for us is that our business has thrived in the 12 months since through taking a forensic look at why we were so vulnerable and what we could do to not repeat this in the future. I firmly believe that it had to do with not having a flexible enough business model to weather storms like this when they presented themselves. To use an analogy, we were more like steel rather than bamboo which meant that when things changed, we found it very hard to adapt.
So what were our key lessons learnt and also what changes did we make? I have detailed a number of our insights that may be useful for others given the difficulties that they may be facing during these challenging times. They may be a little controversial but I believe they are necessary if we are going to thrive and not merely survive. The key insights around having a flexible business model are as follows:
- Don’t have a workforce resourcing model made up of entirely employees. This leads to rigidness along with very little room to move when a downturn is experienced. High fixed costs and not much ability to leverage both the peaks and troughs when they hit your business, industries and markets. Have contractors, partners, offshoring arrangements that will allow you to move nimbly when things change;
- Don’t play the volume game where you only make money when you are busy. Focus on the margin game and what you can make money on long term. Having large revenue but making a less than 5% EBIT is not good business. Smaller revenue with higher EBIT is what I would take every time;
- Focus on profitability rather than revenue. Revenue is a fool’s game whereas profit is what enables your business to thrive. This may sound like a small point of difference but a profit mindset means your team thinks like business owners rather than salesman which is what every business owner would love to see from every staff member;
- Outsource those services that you are not competitive in doing yourself or others do better. Make a margin on this work rather than not even get to the negotiation table because you are too expensive or you cannot deliver value for money;
- Leverage technology. Our business is now heavy users of virtual assistants, freelancer and o-desk just to name a few. All new global platforms that have enabled us to thrive during challenging times and free up our staff to play to their strengths and increase the value they provide to the business and our clients;
- Look to generate passive forms of income from your IP, new products and different mediums such as online. An example of this is that during these challenging times, we have launched a new online coaching program called easyconsult (www.easyconsult.com.au). This business has exploded and generates passive income for us every month selling one to many. It would not have come about so early without us questioning the concept of selling time and replacing this with selling products for significant value to many;
- Make sure you don’t have dependency on key people medium to long term. What we found was that reliance on the individual rather than the team does not lead to a sustainable business. Investing in your systems, automating your processes and leveraging corporate knowledge are things to do during challenging times because when things turn, you are able to scale up not based on one individual but leveraging the entire organisations capability;
- Some people saw opportunity while others were paralysed by fear. Looking back on it now, what was interesting for me was how people in our business responded to these challenging times. The same situation was occurring to all of us but the responses were vastly different. Those that remain with us saw opportunities for themselves and the business and ran with it. We need more people in every business to respond this way; and
- Sell globally but think locally. The biggest aha moment for me was how important it was that only 30% of our business was in South Australia. From the start of BRS, we have always provided services interstate and in to Australasia. This has served us very well and reinforced how important it is to know you are offering services globally. This is something every business should do and can do given technology, systems and people we have access to.
One of my favourite sayings is that “It is not the strongest of species that survive but those most adaptable to change – Charles Darwin”. The changes we have seen in our business, markets and industries I believe are here to stay. How we respond will define how successful we will be as a State, as businesses and as individuals. Be more like bamboo rather than steel and I suspect that you will thrive and actually enjoy the journey that a flexible business model will provide.