If you’re a business owner, you focus on profit, which can distract you from the need to improve business stability. When the pandemic hit in 2020, it kicked off a series of crises that we’re still recovering from today. These crises have been a stark reminder of how important it is to prioritize stability and resilience in business.
Truly strong businesses can weather distress and disruption of many types – broken supply chains, loss of employees, exponential rise in raw materials costs, dramatic shifts in demand, and more. And companies like Netflix and Zoom show that you can make money in any economic environment – both saw exponential growth during Covid.
You must be deliberate about building a resilient business. It won’t necessarily happen automatically. The good news is that not only will the time and investment improve your business’s longevity, but stability is also highly profitable. You will build value in the company, and your profitability will improve.
The goal is a thriving company of course, but stability allows you to stay in the game longer.
Improving business stability will ensure your business can survive both the once-in-a-lifetime and everyday crises that are inevitable in life. We can sum them up in one word: Diversify.
Diversify Revenue Streams to Build Business Stability
Relying on a single source of revenue will expose your business to market fluctuations and changes in customer preferences. We worked with a healthcare company that serviced only a handful of larger healthcare facilities. In an acquisition binge, every facility was gobbled up by a larger operator who moved their contract to another provider. For them, their diversification was an illusion.
To enhance stability, explore ways to bring in revenue from different sources (new markets or different customer segments) and different products or services.
We’ve shown clients how to bundle products and services they already had into other forms to create choices for their prospects. We also help them build in additional margin-enhancing options for stale or little-used or sold products.
We often work with clients showing them ways to expand their universe of target markets. For example, we pushed a company that was heavily focused on the tech market to branch out into healthcare and financial services. This smoothed out revenue over different industries’ budget cycles.
Diversify with Customer Bases and Target Markets
You may have heard of “customer concentrations.” If your business relies too heavily on a small number of customers for its revenue, this increases your risk if something happens to those customer relationships. The same holds true if the bulk of your sales are in a specific market niche.
Aim to broaden your customer base and target markets by identifying new customer segments that could benefit from your products or services. This can involve:
- Conducting market research
- Launching marketing campaigns to reach new audiences
- Exploring partnerships with other businesses to access their customer base
Cultivate Strong Customer Relationships To Improve Business Stability
Customer loyalty is powerful. Fostering strong relationships with customers will strengthen your business. Behind every business are people who make decisions. When you connect with those people, learning about their needs, providing excellent customer service, delivering quality products or services, and maintaining open lines of communication, it helps build loyalty and trust. This reduces the risk of losing key clients.
Emphasize the importance of humanizing your customer relationships with your team members and encourage them to spend time on this. Implement customer retention strategies such as loyalty programs or personalized offers to encourage repeat business.
Monitor and Adapt To Market Trends
While you don’t want to change things up too frequently, you also need to avoid stagnation. Follow the market trends, industry developments, and emerging technologies. Regularly assess what your competitors are doing and adjust your business strategy as needed.
We recently worked with two clients to implement a program where they surveyed their market to determine competitor pricing. This information allowed them to calculate their ability to raise prices, and by how much.
By staying proactive and responsive to changes, you can position your business to capitalize on new opportunities and build your reputation as a leader in your industry.
Financial Stability = Business Stability
Financial stability is crucial for long-term success. To stay on top of this, you need finance professionals qualified to assist and advise. We’ve written about sound financial practices in other articles.
- Implement sound financial management practices, including budgeting, cash flow forecasting, and cost control measures.
- Pay attention to the details – update your books regularly, close each month on time, and review your financial reports with an expert.
- Build up cash reserves or lines of credit to weather unexpected financial challenges.
- Regularly review and adjust pricing structures to ensure profitability and maintain a healthy financial position.
Loyal Employees Improve Business Stability
One of the biggest challenges businesses are facing right now is the shortage of qualified people. Those businesses that took their employees for granted are now seeing what happens when those human resources have no loyalty or connection to the company.
The cost of hiring and training a new employee is far greater than retaining a high performer (possibly as high as 2-3 times the employee’s annual salary). Invest in training and development programs to enhance their skills, knowledge, and adaptability. Compensate and reward them fairly – don’t cut corners or rely only on negative consequences. Well-trained and motivated employees are better equipped to handle challenges, adapt to changes, and contribute to the business’s overall stability.
Read more articles on our blog, Capital Concepts Insights. We share stories and perspective on building successful businesses and planning successful exits.
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