The word of the week is resilience. I hear it everywhere. Maybe it’s that once you hear a word you keep noticing it even though it’s not used any more frequently than usual. However, my hunch is that as we come to the end of another challenging year it’s on many minds.
Small firms have always been resilient, as in having the ability to withstand adversity and bounce back from difficult events. That doesn’t mean that small business owners are immune to stress, emotional upheaval, and suffering. It means they have the ability to work through the challenges and pain points and come out the other side still standing. People go into business because they have that resilience mindset in the first place. You wouldn’t do it if you didn’t believe you could bounce.
Businesses have been talking about resilience in other ways this year. We’re hearing about the business itself looking for ways to improve resilience, about resilience in sectors or lack of it, of building resilience into supply chains.
There seems to be a dawning realisation that if you can improve the way your run a business, do business, treat your partners in business, the more likely you are to have staying power. If you improve business performance and productivity for instance you can think about recruitment, training, upskilling and you’re better placed to retain talent and attract customers. It’s the virtuous circle of doing better, improving resilience and growing resilience allowing you to do better.
I was talking to consultants this week about advising businesses looking for investment. You must be investment ready, otherwise why would anyone (including banks) be prepared to risk their money in your business. Part of that is having the right people. Another part is about being sustainable, which isn’t only about having an eye on climate change and reaching Net Zero, but about behaving ethically and making sure your business will stay the course over the longer term.
And then there’s the resilience of the sector. We’ve seen big challenges in the construction sector and in housebuilding in particular this year. There have been more insolvencies and when a big firm goes bust it’s likely that the smaller ones in the sector feel the ripples. If the sector itself is resilient though, there will be healthy firms with big order books to pick up the pieces and take on the skilled people who would otherwise be redundant. If the sector is resilient, even though some firms aren’t and go bust, the sector should rally. That’s where sector-based organisations help by sharing best practice and raising skills and quality.
Supply chains are usually only as resilient as their weakest link. It’s in everyone’s interest to make sure the links are all strong right down the size scale. You can’t sell houses without windows so if the window maker goes to the wall, you’re left frantically searching for a new supplier who can supply in time or you’re sitting with unsold homes without windows through the winter.
You may be surprised that I haven’t mentioned financial resilience yet. Smaller firms are likely to be less resilient financially as they are less likely to have reserves or to be able to get some form of credit or to avail themselves of products like invoices financing which they see as expensive. And if the small firm isn’t financially resilient an overdue payment or an extended payment term can be enough to tip them over the edge, break the supply chain and send ripples through their sector. These ripples reach employees and households, wider society and the tax take as well as the firms themselves.
Despite more optimistic words from politicians and banks we’re not out of the woods. Inflation and interest rates are coming down but that doesn’t mean prices are falling, and both households and businesses are affected. Costs are just rising less quickly. 2024 will be tough for many and the resilience of small firms in particular will be tested severely. We need to pull together in sectors and supply chains, in partnership to make sure we’re all as resilient as possible.